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What changed in LEXICON PHARMACEUTICALS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of LEXICON PHARMACEUTICALS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+308 added−315 removedSource: 10-K (2024-03-25) vs 10-K (2023-03-03)

Top changes in LEXICON PHARMACEUTICALS, INC.'s 2023 10-K

308 paragraphs added · 315 removed · 237 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

82 edited+38 added−42 removed140 unchanged
Biggest changeCentral to the Cures Act are provisions that enhance and accelerate the FDA’s processes for reviewing and approving new drugs and supplements to approved NDAs, including provisions that: • require the FDA to establish a program to evaluate the potential use of real world evidence to help support the approval of a new indication for an approved drug and to help support or satisfy post-approval study requirements; • provide that the FDA may rely upon qualified data summaries to support the approval of a supplemental application with respect to a qualified indication for an already approved drug; • require the FDA to issue guidance for purposes of assisting sponsors in incorporating complex adaptive and other novel trial designs into proposed clinical protocols and applications for new drugs; and • require the FDA to establish a process for the qualification of drug development tools for use in supporting or obtaining FDA approval for or investigational use of a drug. 11 The Cures Act amends Section 114 of the Food and Drug Administration Modernization Act of 1997 to help clarify and facilitate the dissemination of healthcare economic information, including by broadening the definition of healthcare economic information, expressly extending the dissemination of healthcare economic information to payors, and clarifying that healthcare economic information must only relate to an FDA-approved indication rather than directly relate to the indication.
Biggest changeCentral to the Cures Act are provisions that enhance and accelerate the FDA’s processes for reviewing and approving new drugs and supplements to approved NDAs, including provisions that: 10 • require the FDA to establish a program to evaluate the potential use of real world evidence to help support the approval of a new indication for an approved drug and to help support or satisfy post-approval study requirements; • provide that the FDA may rely upon qualified data summaries to support the approval of a supplemental application with respect to a qualified indication for an already approved drug; • require the FDA to issue guidance for purposes of assisting sponsors in incorporating complex adaptive and other novel trial designs into proposed clinical protocols and applications for new drugs; and • require the FDA to establish a process for the qualification of drug development tools for use in supporting or obtaining FDA approval for or investigational use of a drug.
Our scientists identified the targets of sotagliflozin, sodium-glucose cotransporter type 1, or SGLT1, and sodium-glucose cotransporter type 2, or SGLT2, in our target discovery efforts based on their discovery that mice lacking SGLT1, SGLT2 or both exhibited favorable phenotypes across multiple measures of glucose control and metabolism in preclinical models.
Our scientists identified the targets of sotagliflozin, sodium-glucose cotransporter type 1, or SGLT1, and sodium-glucose cotransporter type 2, or SGLT2, in our target discovery efforts based on their discovery that mice lacking SGLT1, SGLT2 or both exhibited favorable phenotypes across multiple measures of metabolism and glucose control in preclinical models.
The effects of LX9211 were assessed over an 11-week evaluation period, which included a 5-week placebo run-off period following the initial 6-week treatment period. The 5 primary efficacy endpoint under evaluation in the study was the change from baseline to week 6 in ADPS based on the 11-point numerical rating scale in patients treated with LX9211 compared with placebo.
The effects of LX9211 were assessed over an 11-week evaluation period, which included a 5-week placebo run-off period following the initial 6-week treatment period. The primary efficacy endpoint under evaluation in the study was the change from baseline to week 6 in ADPS based on the 11-point numerical rating scale in patients treated with LX9211 compared with placebo.
We believe that our ability to successfully compete with these potentially competitive drug candidates and other competitive products currently on the market will depend on, among other things: • the efficacy, safety and reliability of our products; • our ability, and the ability of our collaborators, to complete preclinical and clinical development and obtain regulatory approvals for our drug candidates; • the timing and scope of regulatory approvals of our products; • our ability, and the ability of our collaborators, to obtain product acceptance by physicians and other health care providers and secure coverage and adequate reimbursement for product use in approved indications; • our ability, and the ability of our collaborators, to manufacture and sell commercial quantities of our products; • the skills of our employees and our ability to recruit and retain skilled employees; • protection of our intellectual property; and • the availability of substantial capital resources to fund development and commercialization activities.
We believe that our ability to successfully compete with these competitive products currently on the market and potentially competitive drug candidates will depend on, among other things: • the efficacy, safety and reliability of our products; • our ability, and the ability of our collaborators, to complete preclinical and clinical development and obtain regulatory approvals for our drug candidates; • the timing and scope of regulatory approvals of our products; • our ability, and the ability of our collaborators, to obtain product acceptance by physicians and other health care providers and secure coverage and adequate reimbursement for product use in approved indications; • our ability, and the ability of our collaborators, to manufacture and sell commercial quantities of our products; • the skills of our employees and our ability to recruit and retain skilled employees; • protection of our intellectual property; and • the availability of substantial capital resources to fund commercialization and development activities.
In the European Union, orphan designation is available for products in development which are either intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions affecting not more than 5 in 10,000 persons in the European Union, or intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition in the community and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the medicinal product.
In the European Union, orphan designation is available for products in development which are either intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions affecting not more than 5 in 10,000 persons in the European Union, or intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition 11 in the community and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the medicinal product.
The standard process required by the FDA before a drug candidate may be marketed in the United States generally includes the following: • preclinical laboratory and animal tests performed under current good laboratory practices, or cGLP; • submission of an IND, which must become effective before human clinical trials may commence; • adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug candidate for its intended use; • submission of an NDA, for approval of commercial marketing and sale, or of an NDA supplement, or sNDA, for approval of a new indication if the product is already approved for another indication; • pre-approval inspection of manufacturing facilities and selected clinical investigators for their compliance with cGMP and current good clinical practices, or cGCP; • if the FDA convenes an advisory committee, satisfactory completion of the advisory committee review; and • FDA approval of the NDA or sNDA.
The standard process required by the FDA before a drug candidate may be marketed in the United States generally includes the following: • preclinical laboratory and animal tests performed under current good laboratory practices, or cGLP; • submission of an Investigational New Drug application, or IND, which must become effective before human clinical trials may commence; • adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug candidate for its intended use; • submission of an NDA, for approval of commercial marketing and sale, or of an NDA supplement, or sNDA, for approval of a new indication if the product is already approved for another indication; • pre-approval inspection of manufacturing facilities and selected clinical investigators for their compliance with cGMP and current good clinical practices, or cGCP; • if the FDA convenes an advisory committee, satisfactory completion of the advisory committee review; and • FDA approval of the NDA or sNDA.
There can be no assurance that the FDA will accept 9 an NDA for filing and, even if accepted for filing, that approval will be granted. The FDA may convene an advisory committee to provide clinical insight on NDA review questions. Although the FDA is not required to follow the recommendations of an advisory committee, the agency typically does so.
There can be no assurance that the FDA will accept an NDA for filing and, even if accepted for filing, that approval will be granted. The FDA may convene an advisory committee to provide clinical insight on NDA review questions. Although the FDA is not required to follow the recommendations of an advisory committee, the agency typically does so.
Not only must a company have appropriate substantiation to support claims made about a drug, under the FDA’s current interpretation of relevant laws, a company can make only those claims relating to safety and efficacy that are for indications for which the FDA has approved the drug and are otherwise consistent with the FDA-approved label for the drug.
Not only must a company have appropriate substantiation to support claims made about a drug, under the FDA’s current interpretation of relevant laws, a company can make only those claims relating to safety and efficacy that are for indications for which the FDA has approved the drug and are otherwise consistent with the FDA- 9 approved label for the drug.
These investigations have alleged violations of various United States federal and state laws and regulations, including claims asserting antitrust violations, 10 violations of the FDC Act, false claims laws, the Prescription Drug Marketing Act, anti-kickback laws, and other alleged violations in connection with the promotion of products for unapproved uses, pricing and Medicare and/or Medicaid reimbursement.
These investigations have alleged violations of various United States federal and state laws and regulations, including claims asserting antitrust violations, violations of the FDC Act, false claims laws, the Prescription Drug Marketing Act, anti-kickback laws, and other alleged violations in connection with the promotion of products for unapproved uses, pricing and Medicare and/or Medicaid reimbursement.
Moreover, among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. 13 For example, the ACA has had a significant impact on the health care industry in the United States.
Moreover, among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. For example, the ACA has had a significant impact on the health care industry in the United States.
Main holds a B.S. from the University of Aberdeen, Scotland and a Ph.D. in organic chemistry from the University of Liverpool, England and completed postdoctoral studies at the Woodward Research Institute. 16 Wendy E. McDermott has been our vice president, human resources since January 2022. Ms.
Main holds a B.S. from the University of Aberdeen, Scotland and a Ph.D. in organic chemistry from the University of Liverpool, England and completed postdoctoral studies at the Woodward Research Institute. Wendy E. McDermott has been our vice president, human resources since January 2022. Ms.
Topline data from the study showed a reduction from baseline to week 6 in ADPS of 2.42 points in the LX9211 arm, compared to a reduction of 1.62 points in the placebo arm (p=0.120 versus placebo), missing statistical significance in the study’s primary endpoint but demonstrating clear evidence of effect.
Topline data from the study showed a reduction from baseline to week 6 in ADPS of 2.42 points in the LX9211 arm, compared to a reduction of 1.62 points in the placebo arm (p=0.120 versus placebo), missing statistical significance in the study’s primary endpoint but demonstrating evidence of effect.
Our third-party contract manufacturers also need to obtain materials such as excipients, components and reagents to manufacture our API and finished drug products. Within our supply chain, we have established safety stock amounts for both our API and drug products, and store those in multiple locations.
Our third-party contract manufacturers also need to obtain materials such as excipients, components and reagents to manufacture our API and finished drug products. Within our supply chain, we have established safety stock amounts for both our API and drug products, and store those quantities in multiple locations.
The actual protection afforded by a patent, which can vary from country to country, depends on the type of patent, the scope of its coverage and the availability of legal remedies in the country. We have filed patent applications and hold issued patents covering each of our drug candidates.
The actual protection afforded by a patent, which can vary from country to country, depends on the type of patent, the scope of its coverage and the availability of legal remedies in the country. We have filed patent applications and hold issued patents covering each of our drugs and drug candidates.
The FDA and comparable governmental authorities regulate, among other things, research and development activities and 8 the testing, manufacture, quality control, safety, efficacy, record keeping, reporting, labeling, storage, approval, advertising, promotion, sale, distribution, export and import of pharmaceutical products.
The FDA and comparable governmental authorities regulate, among other things, research and development activities and the testing, manufacture, quality control, safety, efficacy, record keeping, reporting, labeling, storage, approval, advertising, promotion, sale, distribution, export and import of pharmaceutical products.
The competition for our drug candidates includes both marketed products and drug candidates that are being developed by others, including pharmaceutical products that are currently in a more advanced stage of clinical development or commercialization than are our own drug candidates.
The competition for our drugs and drug candidates includes both marketed products and drug candidates that are being developed by others, including pharmaceutical products that are currently in a more advanced stage of commercialization or clinical development than are our own drugs and drug candidates.
Compliance with such requirements can require significant investment in personnel, systems and resources, but failure to properly calculate our prices, or offer required discounts or rebates could subject us to substantial penalties.
Compliance with such requirements can require 12 significant investment in personnel, systems and resources, but failure to properly calculate our prices, or offer required discounts or rebates could subject us to substantial penalties.
We expect that additional state and federal healthcare 14 reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services.
We seek to collaborate with other pharmaceutical and biotechnology companies with respect to drug discovery or the development and commercialization of certain of our drug candidates, particularly with respect to commercialization in territories outside the United States or commercialization in the United States for indications treated by primary care physicians, or when the collaboration may otherwise provide us with access to expertise and resources that we do not possess internally or are complementary to our own.
We seek to collaborate with other pharmaceutical and biotechnology companies with respect to the research, development and commercialization of certain of our drug candidates, particularly with respect to commercialization in territories outside the United States or commercialization in the United States for indications treated by primary care physicians, or when the collaboration may otherwise provide us with access to expertise and resources that we do not possess internally or are complementary to our own.
Additionally, the Creating and Restoring Equal Access to Equivalent Samples Act of 2019, or the CREATES Act, aims to address the concern articulated by both the FDA and others in the industry that some brand manufacturers have improperly restricted the distribution of their products, including by invoking the existence of a risk evaluation and mitigation strategies, or REMS, program for certain products, to deny generic product developers access to samples of brand products.
Additionally, the Creating and Restoring Equal Access to Equivalent Samples Act of 2019, or the CREATES Act, aimed to address the concern articulated by both the FDA and others in the industry that some brand manufacturers have improperly restricted the distribution of their products, including by invoking the existence of a risk evaluation and mitigation strategies, or REMS, program for certain products, to deny generic product developers access to samples of brand products.
We seek to collaborate with other pharmaceutical and biotechnology companies with respect to drug discovery or the development and commercialization of certain of our drug candidates, particularly with respect to commercialization in territories outside the United States or commercialization in the United States for indications treated by primary care physicians, or when the collaboration may provide us with access to expertise and resources that we do not possess internally or are complementary to our own.
We seek to collaborate with other pharmaceutical and biotechnology companies with respect to the research, development and commercialization of certain of our drug candidates, particularly with respect to commercialization in territories outside the United States or commercialization in the United States for indications treated by primary care physicians, or when the collaboration may provide us with access to expertise and resources that we do not possess internally or are complementary to our own.
Mr. Crum was previously a corporate securities attorney with the law firms of Brobeck, Phleger & Harrison LLP and Andrews & Kurth L.L.P., where he represented companies in the energy and information technology industries. Mr. Crum received his B.B.A. and J.D. from the University of Texas. Craig B.
Mr. Crum was previously a corporate securities attorney with the law firms of Brobeck, Phleger & Harrison LLP and Andrews & Kurth L.L.P., where he represented companies in the energy and information technology industries. Mr. Crum received his B.B.A. and J.D. from the University of Texas. Thomas A.
These competitive marketed products and drug candidates include compounds that employ different mechanisms of action in addressing diseases and conditions for which we are developing our own drug candidates and, in some cases such as sotagliflozin, that employ the same or similar mechanisms of action.
These competitive marketed products and drug candidates include compounds that employ different mechanisms of action in addressing diseases and conditions for which we are developing our own drug candidates and, in some cases such as INPEFA, that employ the same or similar mechanisms of action.
Consistent and statistically significant benefits in burning pain, pain interference with sleep and other measures of particular importance in DPN were also observed in both LX9211 treatment arms as compared to placebo during the initial 6-week treatment period.
Consistent and statistically significant benefits in burning pain, pain interference with sleep and other measures of particular importance in DPNP were also observed in both LX9211 treatment arms as compared to placebo during the initial 6-week treatment period.
We seek to retain exclusive or co-exclusive rights to the benefits of certain drug discovery and development programs by developing and commercializing drug candidates from those programs internally, particularly in the United States for indications treated by specialist physicians.
We seek to retain exclusive or co-exclusive rights to the benefits of certain research and development programs by developing and commercializing drug candidates from those programs internally, particularly in the United States for indications treated by specialist physicians.
Raw materials that are used to manufacture our API are sourced from multiple third-party suppliers in Asia and Europe. Third-party API contract manufacturers in Asia and Europe stock sufficient quantities of these materials to ensure they can manufacture quantities of API sufficient to meet our requirements.
Raw materials that are used to manufacture our API are sourced from multiple third-party suppliers in Asia and Europe. Third-party API contract manufacturers in Asia and Europe stock sufficient quantities of these materials to ensure they can manufacture quantities of API sufficient to meet our commercial and clinical requirements.
Similarly, our collaborators face similar competition from other competitors who may succeed in developing products more quickly, developing products that are more 7 effective than those developed by our collaborators or commercialize products more effectively and profitably than our collaborators.
Similarly, our collaborators face similar competition from other competitors who may succeed in developing products 6 more quickly, developing products that are more effective than those developed by our collaborators or commercialize products more effectively and profitably than our collaborators.
We expect that our principal competition for LX9211 for the treatment of DPN would include duloxetine and pregabalin, which are currently marketed for the treatment of DPN by Eli Lilly and Pfizer, respectively, and are also available as generics.
We expect that our principal competition for LX9211 for the treatment of DPNP would include duloxetine and pregabalin, which are currently marketed for the treatment of DPNP by Eli Lilly and Pfizer, respectively, and are also available as generics.
Our RELIEF-DPN-1 clinical trial enrolled 319 patients experiencing DPN in a randomized, double-blind, placebo-controlled study of LX9211 evaluating three treatment groups receiving an initial loading dose of 100mg or 200mg of LX9211 or placebo, followed by once daily doses of 10mg or 20mg of LX9211 or placebo, respectively.
Our RELIEF-DPN-1 Phase 2 clinical trial enrolled 319 patients experiencing DPNP in a randomized, double-blind, placebo-controlled study of LX9211 evaluating three treatment groups receiving an initial loading dose of 100mg or 200mg of LX9211 or placebo, followed by once daily doses of 10mg or 20mg of LX9211 or placebo, respectively.
We also expect that we would experience competition from gabapentin, which is available as a generic and is frequently prescribed off-label for the treatment of DPN.
We also expect that we would experience competition from gabapentin, which is available as a generic and is frequently prescribed off-label for the treatment of DPNP.
Alexander 55 Vice President, Finance and Accounting Lonnel Coats has been our chief executive officer and a director since July 2014. Mr.
Alexander 56 Vice President, Finance and Accounting Lonnel Coats has been our chief executive officer and a director since July 2014. Mr.
We have identified and validated in living animals, or in vivo, more than 100 targets with promising profiles for drug discovery. We are working both independently and through collaborations and strategic alliances with third parties to capitalize on our drug target discoveries and drug discovery and development programs.
We have identified and validated in living animals, or in vivo, more than 100 targets with promising profiles for drug discovery. We have worked both independently and through collaborations and strategic alliances with third parties to capitalize on our drug target discoveries and research and development programs.
We have identified and validated in living animals, or in vivo , more than 100 targets with promising profiles for drug discovery. Collaborations and Strategic Alliances We are working both independently and through collaborations and strategic alliances with third parties to capitalize on our drug target discoveries and drug discovery and development programs.
We have identified and validated in living animals, or in vivo , more than 100 targets with promising profiles for drug discovery. Collaborations and Strategic Alliances We have worked both independently and through collaborations and strategic alliances with third parties to capitalize on our drug target discoveries and research and development programs.
Our quality department audits these suppliers on a periodic basis. We work closely with our third-party manufacturers to ensure compliance with current good manufacturing practices, or cGMP, and other stringent regulatory requirements enforced by the FDA and foreign regulatory agencies in other territories, as applicable.
Our quality department audits these suppliers on a periodic basis. Our commercial suppliers are subject to routine inspection by regulatory agencies. We work closely with our third-party manufacturers to ensure compliance with current good manufacturing practices, or cGMP, and other stringent regulatory requirements enforced by the FDA and foreign regulatory agencies in other territories, as applicable.
In addition to obtaining FDA approval for each product, each drug manufacturing establishment must be inspected and approved by the FDA. All manufacturing establishments are subject to inspections by the FDA and by other federal, state and local agencies and must comply with current Good Manufacturing Practices requirements.
In addition to obtaining FDA approval for each product, each drug manufacturing establishment must be inspected and approved by the FDA. All manufacturing establishments are subject to inspections by the FDA and by other federal, state and local agencies and must comply with cGMP requirements.
Sotagliflozin and compounds from a number of additional drug programs originated from our own internal drug discovery efforts, and LX9211 originated from our collaborative neuroscience drug discovery efforts with Bristol-Myers Squibb.
INPEFA, LX9851 and compounds from a number of additional drug programs originated from our own internal drug discovery efforts, and LX9211 originated from our collaborative neuroscience drug discovery efforts with Bristol-Myers Squibb.
Consistent with this approach, we seek to retain exclusive rights to the benefits of certain drug discovery and development programs by developing and commercializing drug candidates from those programs internally, particularly in the United States for indications treated by specialist physicians.
Consistent with this approach, we seek to retain exclusive rights to the benefits of certain research and development programs by developing and commercializing drug candidates from those programs internally, particularly in the United States for indications treated by specialist physicians, as we have with INPEFA in the United States.
Our RELIEF-PHN-1 clinical trial enrolled 79 patients experiencing PHN in a randomized, double-blind, placebo-controlled study of LX9211 evaluating two treatment groups receiving an initial loading dose of 200mg of LX9211 or placebo, followed by once daily doses of 20mg of LX9211 or placebo, respectively.
Our RELIEF-PHN-1 Phase 2 clinical trial enrolled 79 patients experiencing post-herpetic neuralgia, or PHN, in a randomized, double-blind, placebo-controlled study of LX9211 evaluating two treatment groups receiving an initial loading 4 dose of 200mg of LX9211 or placebo, followed by once daily doses of 20mg of LX9211 or placebo, respectively.
Instead, we have multiple contractual agreements in place with third-party contract manufacturing organizations, or CMOs, who, on our behalf, manufacture supplies of sotagliflozin, LX9211 and our other drug candidates, and will continue to do so for the foreseeable future.
Instead, we have multiple contractual agreements in place with third-party contract manufacturing organizations, or CMOs, who, on our behalf, manufacture commercial supplies of INPEFA and clinical supplies of our drug candidates, and will continue to do so for the foreseeable future.
We own or exclusively license patents and patent applications throughout the world that claim our products and drug candidates, including: • issued patents and pending patent applications in Europe, the United States, and other countries throughout the world, including Australia, Argentina, Brazil, Canada, China, Europe, India, Israel, Japan, Mexico, New Zealand, South Africa, and South Korea, that claim sotagliflozin, crystalline forms of sotagliflozin, pharmaceutical compositions comprising sotagliflozin, and methods of its manufacture and use; and • issued patents and pending patent applications in Europe, the United States, and other countries throughout the world, including Australia, Brazil, Canada, China, Europe, India, Israel, Japan, Mexico, New Zealand, South Africa, and South Korea, that claim LX9211, pharmaceutical compositions comprising LX9211, and methods of its use.
We own or exclusively license patents and patent applications throughout the world that claim our drugs and drug candidates, including: • issued patents and pending patent applications in Europe, the United States, and other countries throughout the world, including Australia, Argentina, Brazil, Canada, China, Europe, India, Israel, Japan, Mexico, New Zealand, South Africa, and South Korea, that claim INPEFA, crystalline forms of INPEFA, pharmaceutical compositions comprising INPEFA, and methods of its manufacture and use; • issued patents and pending patent applications in Europe, the United States, and other countries throughout the world, including Australia, Brazil, Canada, China, Europe, India, Israel, Japan, Mexico, New Zealand, South Africa, and South Korea, that claim LX9211, pharmaceutical compositions comprising LX9211, and methods of its use; and • a pending United States patent application that claims LX9851, pharmaceutical compositions comprising it, and methods of its manufacture and use.
We store API at third-party facilities in North America, and provide appropriate amounts to third-party drug product contract manufacturers in North America who then manufacture, package and label our specified quantities of finished goods for sotagliflozin, LX9211 and our other drug candidates.
We store API at third-party facilities in North America, and provide appropriate amounts to third-party drug product contract manufacturers in North America who then manufacture, package and label our specified quantities of finished commercial goods for INPEFA and clinical goods for our drug candidates.
Additional Drug Discovery and Development Programs We are conducting preclinical research and development and preparing to conduct clinical development of compounds from a number of additional drug programs originating from our internal drug discovery efforts.
Additional Research and Development Programs We are conducting preclinical research and development of compounds from a number of additional drug programs originating from our internal drug discovery efforts.
In addition, we are entitled to receive clinical and regulatory milestone payments ranging, depending on the timing and extent of our efforts in the alliance, up to $76 million for each drug developed by Bristol-Myers Squibb under the alliance. We will also earn royalties on sales of drugs commercialized by Bristol-Myers Squibb under the alliance.
In addition, we are entitled to receive clinical and regulatory milestone payments ranging, depending on the timing and extent of our efforts in the alliance, up to $76 million for each drug developed by Bristol-Myers Squibb under the alliance.
We expect that such competition would also include, to some extent, other classes of drugs used in the treatment of heart failure, such as the combination drug sacubitril/valsartan, currently marketed for the treatment of heart failure by Novartis, and vericiguat, currently marketed for the treatment of heart failure by Merck.
Such competition also includes, to some extent, other classes of drugs used in the treatment of heart failure, such as the combination drug sacubitril/valsartan, currently marketed for the treatment of heart failure by Novartis, and vericiguat, currently marketed for the treatment of heart failure by Merck.
None of our United States patents that claim one of our drug candidates has a normal expiration date earlier than 2028. All of our employees, consultants and advisors are required to execute a proprietary information agreement upon the commencement of employment or consultation.
None of our United States patents that claim LX9211 has a normal expiration date earlier than 2035. 14 All of our employees, consultants and advisors are required to execute a proprietary information agreement upon the commencement of employment or consultation.
We previously filed an NDA for sotagliflozin in type 1 diabetes, regarding which the FDA issued a complete response letter in March 2019 and confirmed that position in denying two appeals of the complete response letter in November 2019 and March 2020.
Type 1 Diabetes The FDA issued a complete response letter in March 2019 regarding our NDA for sotagliflozin in type 1 diabetes and confirmed that position in denying two appeals of the complete response letter in November 2019 and March 2020.
Competition The biotechnology and pharmaceutical industries are highly competitive and characterized by rapid technological change. We face significant competition in each of the aspects of our business from other pharmaceutical and biotechnology companies, as well as academic research institutions, clinical reference laboratories and governmental agencies that are pursuing research or development activities similar to ours.
We face significant competition in each of the aspects of our business from other pharmaceutical and biotechnology companies, as well as academic research institutions, clinical reference laboratories and governmental agencies that are pursuing research or development activities similar to ours.
We expect that our principal competition for sotagliflozin in the treatment of type 1 diabetes would include established insulin therapies, as well as selective SGLT2 inhibitors currently being prescribed off-label.
We expect that our principal competition for sotagliflozin in the treatment of type 1 diabetes would include established insulin therapies, and potentially, to some extent, selective SGLT2 inhibitors currently being prescribed off-label.
Risk Factors.” 15 Executive Officers Our executive officers and their ages and positions are listed below. Name Age Position with the Company Lonnel Coats 58 Chief Executive Officer and Director Jeffrey L. Wade 58 President and Chief Financial Officer Brian T. Crum 50 Senior Vice President and General Counsel Craig B.
Risk Factors.” Executive Officers Our executive officers and their ages and positions are listed below. Name Age Position with the Company Lonnel Coats 59 Chief Executive Officer and Director Jeffrey L. Wade 59 President and Chief Financial Officer Brian T. Crum 51 Senior Vice President and General Counsel Thomas A.
Significant Shareholders We have valuable relationships with Invus, L.P. and its affiliates, which we collectively refer to as Invus. Invus currently owns approximately 50.5% of the outstanding shares of our common stock. Human Capital Resources As of February 28, 2023, we employed 135 persons, of whom 18 hold M.D. or Ph.D. degrees and another 47 hold other advanced degrees.
Significant Shareholders We have valuable relationships with Invus, L.P. and its affiliates, which we collectively refer to as Invus. Invus currently owns approximately 50% of the outstanding shares of our common stock. Human Capital Resources As of March 21, 2024, we employed 285 persons, of whom 22 hold M.D. or Ph.D. degrees and another 73 hold other advanced degrees.
Our corporate headquarters are located at 2445 Technology Forest Blvd., 11th Floor, The Woodlands, Texas 77381, and our telephone number is (281) 863-3000. 1 Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are made available free of charge on our corporate website located at www.lexpharma.com as soon as reasonably practicable after the filing of those reports with the Securities and Exchange Commission, or the SEC.
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are made available free of charge on our corporate website located at www.lexpharma.com as soon as reasonably practicable after the filing of 1 those reports with the Securities and Exchange Commission, or the SEC.
Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials; and • Phase 3 clinical trials are conducted in larger patient populations at multiple clinical trial sites to obtain statistically significant evidence of the efficacy of the drug candidate for its intended use and to further test for safety in an expanded patient population.
Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials; and • Phase 3 clinical trials are conducted in larger patient populations at multiple clinical trial sites to obtain statistically significant evidence of the efficacy of the drug candidate for its intended use and to further test for safety in an expanded patient population. 8 In addition, the FDA may require, or companies may pursue, additional clinical trials after a product is approved.
In addition, the FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase 4 studies may be made a condition to be satisfied after a drug receives approval. Failure to satisfy such post-marketing commitments can result in FDA enforcement action, up and to including withdrawal of NDA approval.
These so-called Phase 4 studies may be made a condition to be satisfied after a drug receives approval. Failure to satisfy such post-marketing commitments can result in FDA enforcement action, up and to including withdrawal of NDA approval.
Research and Development Expenses In 2022, 2021 and 2020, respectively, we incurred expenses of $52.8 million, $55.0 million and $153.6 million in company-sponsored as well as collaborative research and development activities, including $4.3 million, $4.3 million and $6.4 million of stock-based compensation expense in 2022, 2021 and 2020, respectively. 17
Research and Development Expenses In 2023, 2022 and 2021, respectively, we incurred expenses of $58.9 million, $52.8 million and $55.0 million in company-sponsored as well as collaborative research and development activities, including $5.1 million, $4.3 million and $4.3 million of stock-based compensation expense in 2023, 2022 and 2021, respectively. 16
We have also advanced a number of additional compounds into various stages of clinical and preclinical development. Sotagliflozin Sotagliflozin is an orally-delivered small molecule compound for which we have a pending NDA for heart failure and that we have separately been developing for type 1 diabetes.
We have also advanced a number of additional compounds into various stages of preclinical research and development. INPEFA (sotagliflozin) INPEFA (sotagliflozin) is an orally-delivered small molecule compound that we are commercializing for heart failure and developing for type 1 diabetes and HCM.
Kassler-Taub, M.D. has been our senior vice president, regulatory affairs and quality assurance since October 2021 and previously served as vice president, clinical operations and in other senior capacities since joining our company in 2014. Dr.
Granowitz received his B.A. from Dartmouth College and his M.D. and Ph.D. from Columbia University. Kenneth B. Kassler-Taub, M.D. has been our senior vice president, regulatory affairs and quality assurance since October 2021 and previously served as vice president, clinical operations and in other senior capacities since joining our company in 2014. Dr.
Granowitz, M.D., Ph.D. 58 Senior Vice President and Chief Medical Officer Kenneth B. Kassler-Taub, M.D. 66 Senior Vice President, Regulatory and Quality Assurance Alan J. Main, Ph.D. 69 Executive Vice President, Innovation and Chemical Sciences Wendy E. McDermott 52 Vice President, Human Resources Kiernan A. Seth, Ph.D. 56 Vice President and Chief Commercial Officer Kristen L.
Garner 48 Senior Vice President and Chief Commercial Officer Craig B. Granowitz, M.D., Ph.D. 59 Senior Vice President and Chief Medical Officer Kenneth B. Kassler-Taub, M.D. 67 Senior Vice President, Regulatory and Quality Assurance Alan J. Main, Ph.D. 70 Executive Vice President, Innovation and Chemical Sciences Wendy E. McDermott 53 Vice President, Human Resources Kristen L.
The period of market exclusivity may be reduced to six years if at the end of the fifth year it is established that the criteria for orphan designation are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. 12 Healthcare Regulation Federal and state healthcare laws, including fraud and abuse and health information privacy and security laws, also apply to our business.
The period of market exclusivity may be reduced to six years if at the end of the fifth year it is established that the criteria for orphan designation are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.
If we fail to comply with those laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.
Healthcare Regulation Federal and state healthcare laws, including fraud and abuse and health information privacy and security laws, also apply to our business. If we fail to comply with those laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.
We expect that our principal competition for sotagliflozin for the treatment of heart failure would include selective SGLT2 inhibitors which have gained or may gain regulatory approval for the treatment of heart failure.
Our principal competition for INPEFA for the treatment of heart failure includes drugs which selectively inhibit SGLT2, or selective SGLT2 inhibitors, which have gained or may gain regulatory approval for the treatment of heart failure.
LX9211 and another development compound acting through AAK1 were discovered by scientists working within our alliance with Bristol-Myers Squibb. We have agreed to pay Bristol-Myers Squibb up to $34.5 million in clinical and regulatory milestones for the first indication and up to $16 million in clinical and regulatory milestones for each of the second and third indications, if applicable.
We have agreed to pay Bristol-Myers Squibb up to $34.5 million in clinical and regulatory milestones for the first indication and up to $16 million in clinical and regulatory milestones for each of the second and third indications, if applicable.
Alexander has been our vice president of finance and accounting and principal accounting officer since September 2021 and previously served as controller since joining our company in 2017. Ms.
McDermott received her B.A. from State University of New York at Plattsburgh. Kristen L. Alexander has been our vice president of finance and accounting and principal accounting officer since September 2021 and previously served as controller since joining our company in 2017. Ms.
Information found on our website should not be considered part of this annual report on Form 10-K. Alternatively, you may access these reports on the SEC’s website at www.sec.gov .
Information found on our website should not be considered part of this annual report on Form 10-K. Alternatively, you may access these reports on the SEC’s website at www.sec.gov . Drugs and Drug Candidates We are devoting most of our resources to the commercialization of INPEFA and the research and development of sotagliflozin, LX9211 and LX9851.
The quantities that we store are based on our business needs and take into account scenarios for demand, production lead times, potential supply interruptions and shelf life for our API and drug products. In parallel, for business continuity reasons, we will evaluate the need to establish an additional or backup supplier for our API and drug product, as necessary.
The quantities that we store are based on our business needs and take into account scenarios for demand, production lead times, potential supply interruptions and shelf life for our API and drug products.
In some cases, we remain eligible to receive milestone or royalty payments on the sale of mice and phenotypic data or on products that our collaborators discover or develop using our technology. Manufacturing and Product Supply We do not own or operate manufacturing or distribution facilities or resources for production and distribution of sotagliflozin, LX9211 or our other drug candidates.
In some cases, we remain eligible to receive milestone or royalty payments on the sale of mice and phenotypic data or on products that our collaborators discover or develop using our technology.
Government Regulation The development, manufacture and sale of pharmaceutical products are subject to extensive regulation by United States and foreign governmental authorities, including federal, state and local authorities. In the United States, new drugs are subject to regulation under the Federal Food, Drug and Cosmetic Act and the regulations promulgated thereunder, or the FDC Act.
In the United States, new drugs are subject to regulation under the Federal Food, Drug and Cosmetic Act and the regulations promulgated thereunder, or the FDC Act.
Our inTandem3 Phase 3 clinical trial enrolled 1,405 patients with type 1 diabetes in the United States and Europe in a randomized, double-blind, placebo-controlled study of a 400mg once daily dose of sotagliflozin over a 24-week treatment period. Insulin therapy was not optimized in patients and eligibility criteria included any background insulin therapy.
Data from the study showed that patients treated with sotagliflozin experienced statistically significant reductions in A1C from baseline of 0.39% for the 200mg dose (p Our inTandem3 Phase 3 clinical trial enrolled 1,405 patients with type 1 diabetes in the United States and Europe in a randomized, double-blind, placebo-controlled study of a 400mg once daily dose of sotagliflozin over a 24-week treatment period.
Data from the study showed statistically significant superiority of sotagliflozin (28.6%) compared to placebo (15.2%) in the proportion of patients achieving A1C levels of less than 7% without experiencing a severe hypoglycemic or DKA event (p LX9211 LX9211 is an orally-delivered small molecule compound that we are developing as a treatment for neuropathic pain.
Data from the study showed statistically significant superiority of sotagliflozin (28.6%) compared to placebo (15.2%) in the proportion of patients achieving A1C levels of less than 7% without experiencing a severe hypoglycemic or DKA event (p 3 discontinuation due to adverse events were 2.3% and 6.3%, respectively.
As a result, our competitors may succeed in developing products earlier than we do, obtaining approvals from the FDA or other regulatory agencies for those products more rapidly than we do, developing products that are more effective than those we develop or commercializing products more effectively and profitably than we do.
Many of our competitors have substantially greater research, development and commercialization capabilities and financial, scientific, marketing and human resources than we do. As a result, our competitors have and may in the future succeed in developing products earlier than we do and obtaining approvals from the FDA or other regulatory agencies for those products more rapidly than we do.
DHHS has solicited feedback on some of various measures intended to lower drug prices and reduce the out of pocket costs of drugs and implemented others under its existing authority. Congress and the executive branch have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs, making this area subject to ongoing uncertainty.
Congress and the executive branch have each indicated that it will 13 continue to seek new legislative and/or administrative measures to control drug costs, making this area subject to ongoing uncertainty.
We have also agreed to pay single digit royalties on worldwide net sales and up to $40 million in commercial milestones. Genentech We established a drug discovery alliance with Genentech, Inc. in December 2002 to discover novel therapeutic proteins and antibody targets.
We have also agreed to pay single digit royalties on worldwide net sales and up to $40 million in commercial milestones.
Granowitz served as senior vice president and head of global medical affairs, global human health of Merck & Co., Inc. and in a variety of medical and commercial management positions for Schering-Plough Corporation. Dr. Granowitz received his B.A. from Dartmouth College and his M.D. and Ph.D. from Columbia University. Kenneth B.
Granowitz previously served as chief medical officer of Amarin Corporation plc since 2016. Prior to joining Amarin, Dr. Granowitz served as senior vice president and head of global medical affairs, global human health of Merck & Co., Inc. and in a 15 variety of medical and commercial management positions for Schering-Plough Corporation. Dr.
LX9211 has received Fast Track designation from the FDA for development in diabetic peripheral neuropathic pain, or DPN. We have completed two Phase 2 clinical trials evaluating LX9211 in neuropathic pain.
We are conducting a Phase 2b clinical trial of LX9211 in diabetic peripheral neuropathic pain, or DPNP, and have received Fast Track designation from the FDA for development of LX9211 in that indication.
We were incorporated in Delaware in July 1995, commenced operations in September 1995 and were listed on The Nasdaq Global Select Market in April 2000.
We were incorporated in Delaware in July 1995, commenced operations in September 1995 and were listed on The Nasdaq Global Select Market in April 2000. Our corporate headquarters are located at 2445 Technology Forest Blvd., 11th Floor, The Woodlands, Texas 77381, and our telephone number is (281) 863-3000.
Under the NDA, we are seeking regulatory approval to market sotagliflozin to reduce the risk of cardiovascular death and hospitalization for heart failure in adults with heart failure and in adults with type 2 diabetes mellitus, chronic kidney disease and other cardiovascular risk factors.
We are devoting most of our resources to the commercialization of our approved drug, INPEFA ® (sotagliflozin), for heart failure and the research and development of our most advanced drug candidates: • We are commercializing INPEFA, an orally-delivered small molecule drug, in the United States to reduce the risk of cardiovascular death, hospitalization for heart failure, and urgent heart failure visits in adults with heart failure or type 2 diabetes mellitus, chronic kidney disease, or CKD, and other cardiovascular risk factors.
At our request, the FDA has issued a public Notice of Opportunity for Hearing on whether there are grounds for denying approval of our NDA and the hearing process is ongoing. • We are developing LX9211, an orally-delivered small molecule drug candidate, as a treatment for neuropathic pain.
At our request, the FDA issued a public Notice of Opportunity for Hearing, or NOOH, in March 2021 on whether there are grounds for denying approval of our NDA.
Under the NDA, we are seeking regulatory approval to market sotagliflozin to reduce the risk of cardiovascular death and hospitalization for heart failure in adults with heart failure and in adults with type 2 diabetes mellitus, chronic kidney disease and other cardiovascular risk factors.
Heart Failure We commercially launched INPEFA, a once-daily oral tablet, following regulatory approval in the United States in May 2023 to reduce the risk of cardiovascular death, hospitalization for heart failure, and urgent heart failure visit in adults with heart failure or type 2 diabetes, CKD, and other cardiovascular risk factors.
We have not commercially launched sotagliflozin for the treatment of type 1 diabetes in the United Kingdom or any other region. We have completed three Phase 3 clinical trials evaluating the safety and tolerability of sotagliflozin and its effects on glycemic parameters associated with type 1 diabetes.
Following FDA feedback from such discussions, we are now preparing to resubmit our NDA for sotagliflozin as an adjunct to insulin therapy for patients with type 1 diabetes and CKD. 2 We have completed three Phase 3 clinical trials evaluating the safety and tolerability of sotagliflozin and its effects on glycemic parameters associated with type 1 diabetes.
We have completed two Phase 3 clinical trials evaluating the safety and tolerability of sotagliflozin and its effects on long-term outcomes related to composite primary endpoints of total cardiovascular death, hospitalizations for heart failure and urgent visits for heart failure.
We have completed two Phase 2 clinical trials evaluating the safety and tolerability of LX9211 and its effects on neuropathic pain.
Preclinical studies of sotagliflozin demonstrated that compounds inhibiting both targets had a favorable preclinical profile relative to compounds selective for SGLT2. Heart Failure The FDA is currently reviewing our NDA for sotagliflozin in heart failure and has assigned a PDUFA target action date of May 27, 2023.
Preclinical studies of sotagliflozin demonstrated that compounds inhibiting both targets had a favorable preclinical profile relative to compounds selective for SGLT2. We use “INPEFA” when referring to our FDA-approved drug and “sotagliflozin” when referring to our development of INPEFA for type 1 diabetes, HCM and any additional indications.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf approved, our future sales of sotagliflozin will depend on numerous factors, including: • the specific indication, warnings and other labeling language approved by the FDA; • the number of patients suffering from heart failure; • competition from dapagliflozin, empagliflozin and, to some extent, other classes of drugs used in the treatment of heart failure, such as the combination drug sacubitril/valsartan; • the safety profile of sotagliflozin, including whether previously unknown side effects or increased incidence or severity of known side effects as compared to those seen during development are identified with the commercial use of sotagliflozin; • the effectiveness of our commercial strategy for marketing sotagliflozin and our execution of that strategy, including our pricing strategy and the effectiveness of our efforts to obtain and maintain adequate third-party reimbursement; • the acceptance of sotagliflozin by patients, the medical community and third-party payers; and • our ability to meet the demand for commercial supplies of sotagliflozin and to maintain and successfully monitor commercial manufacturing arrangements for sotagliflozin with third-party manufacturers to ensure they meet our standards and those of the FDA, which extensively regulates and monitors pharmaceutical manufacturing facilities. 19 While we believe that sotagliflozin, if approved, will have a competitive commercial profile, our current estimates of the revenues that sotagliflozin could generate in future periods may change based upon the above factors, and could prove to be incorrect.
Biggest changeOur future sales of INPEFA will depend on numerous factors, including: • the number of patients suffering from heart failure; • competition from dapagliflozin, empagliflozin and, to some extent, other classes of drugs used in the treatment of heart failure, such as the combination drug sacubitril/valsartan; • the effectiveness of our commercial strategy for marketing INPEFA and our execution of that strategy, in particular the effectiveness of our efforts to obtain and maintain adequate third-party reimbursement; • the safety profile of INPEFA, including whether previously unknown side effects or increased incidence or severity of known side effects as compared to those seen during development are identified with the commercial use of INPEFA; • the acceptance of INPEFA by patients, the medical community and third-party payers; and • our ability to meet the demand for commercial supplies of INPEFA and to maintain and successfully monitor commercial manufacturing arrangements for INPEFA with third-party manufacturers to ensure they meet our standards and those of the FDA, which extensively regulates and monitors pharmaceutical manufacturing facilities.
If we are unable to establish such collaborations, or if pharmaceutical products are not successfully and timely developed and commercialized under such collaborations, our opportunities to generate revenues from our other drug candidates will be greatly reduced.
If we are unable to establish such collaborations, or if pharmaceutical products are not successfully and timely developed and commercialized under such collaborations, our opportunities to generate revenues from our other drug candidates will be greatly reduced.
Risks Related to Our Common Stock • Invus, L.P. and its affiliates own a controlling interest in our outstanding common stock and may have interests which conflict with those of our other stockholders. • Invus has additional rights under its stockholders’ agreement relating to the membership of our board of directors and under our certificate of incorporation relating to preemptive and consent rights, which provide Invus with substantial influence over significant corporate matters.
Risks Related to Our Common Stock • Invus, L.P. and its affiliates own a substantial interest in our outstanding common stock and may have interests which conflict with those of our other stockholders. • Invus has additional rights under its stockholders’ agreement relating to the membership of our board of directors and under our certificate of incorporation relating to preemptive and consent rights, which provide Invus with substantial influence over significant corporate matters.
As a result, significant uncertainty exists 24 as to whether and how much third-party payers will reimburse for newly approved drugs, which in turn will put pressure on the pricing of drugs. Further, we do not have experience in ensuring approval by applicable third-party payers outside of the United States for coverage and reimbursement of pharmaceutical products.
As a result, significant uncertainty exists as to whether and how much third-party payers will reimburse for newly approved drugs, which in turn will put pressure on the pricing of drugs. Further, we do not have experience in ensuring approval by applicable third-party payers outside of the United States for coverage and reimbursement of pharmaceutical products.
We will be 29 able to protect our intellectual property rights from unauthorized use by third parties only to the extent that our products and technologies are covered by valid and enforceable patents or other intellectual property rights, or are effectively maintained as trade secrets or otherwise protected from disclosure by non-disclosure agreements.
We will be able to protect our intellectual property rights from unauthorized use by third parties only to the extent that our products and technologies are covered by valid and enforceable patents or other intellectual property rights, or are effectively maintained as trade secrets or otherwise protected from disclosure by non-disclosure agreements.
It is often difficult to anticipate or immediately detect such incidents and the damage caused by such incidents, particularly for cyber incidents such as advanced persistent threats. These data breaches and any unauthorized access or disclosure of our information or intellectual property could compromise our intellectual property and expose sensitive business information.
It is often difficult to anticipate or immediately detect such incidents and the damage caused by such incidents, particularly for cyber incidents such as advanced persistent threats. These data breaches and any unauthorized access or disclosure of our information or intellectual property could compromise our 30 intellectual property and expose sensitive business information.
In such event, our capital needs will be substantially higher and we will be reliant on obtaining financing in support of any such Phase 3 development program from alternative sources. We cannot be certain that such financing will be available in amounts or on terms acceptable to us, if at all.
In such event, our capital needs will be substantially higher and we will be reliant on obtaining financing in support of any such Phase 3 development program from alternative sources. We cannot be certain that such financing will be available in amounts or on terms acceptable 25 to us, if at all.
Our network security and data recovery measures and those of our vendors may not be able to detect or prevent every attempted breach and may not permit us to respond effectively to every breach. These incidents could also subject us to liability, expose us to significant expense and cause 31 significant harm to our reputation and business.
Our network security and data recovery measures and those of our vendors may not be able to detect or prevent every attempted breach and may not permit us to respond effectively to every breach. These incidents could also subject us to liability, expose us to significant expense and cause significant harm to our reputation and business.
The failure to achieve and maintain these high manufacturing standards, including the incidence of manufacturing errors, could result in patient injury or death, product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously hurt our business.
The failure to achieve and maintain these high manufacturing standards, including the incidence of manufacturing errors, could result in patient injury or death, 21 product recalls or withdrawals, delays or failures in product testing or delivery, cost overruns or other problems that could seriously hurt our business.
The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals, such as the Inflation Reduction Act, that may have the effect of reducing the prices that we are able to charge for products we or our collaborators may develop.
The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals, such as the Inflation Reduction Act, that may have the effect of reducing the prices that we are able to 23 charge for products we or our collaborators may develop.
To effectively manage our expected growth, we must continue to improve existing, and implement new, operational and financial systems, procedures and controls and must expand, train and manage our growing employee base, and there can be no assurance that we will effectively manage our growth without experiencing operating inefficiencies or control deficiencies.
To effectively manage our growth, we must continue to improve existing, and implement new, operational and financial systems, procedures and controls and must expand, train and manage our growing employee base, and there can be no assurance that we will effectively manage our growth without experiencing operating inefficiencies or control deficiencies.
The failure to comply with these requirements or the identification of safety problems during commercial marketing could lead to the need for product marketing restrictions, product withdrawal or recall or other voluntary or regulatory action, which could delay further 22 marketing until the product is brought into compliance.
The failure to comply with these requirements or the identification of safety problems during commercial marketing could lead to the need for product marketing restrictions, product withdrawal or recall or other voluntary or regulatory action, which could delay further marketing until the product is brought into compliance.
If we are unable to secure such financing, we may be required to reduce the scope of any such Phase 3 development program. We have a history of net losses, and we expect to continue to incur net losses and may not achieve or maintain profitability.
If we are unable to secure such financing, we may be required to forego or reduce the scope of any such Phase 3 development program. We have a history of net losses, and we expect to continue to incur net losses and may not achieve or maintain profitability.
Because of 26 the numerous risks and uncertainties associated with successfully developing and commercializing drug products, we are unable to predict the extent of any future losses or whether or when we will become profitable, if at all.
Because of the numerous risks and uncertainties associated with successfully developing and commercializing drug products, we are unable to predict the extent of any future losses or whether or when we will become profitable, if at all.
While we seek to protect our proprietary information by entering into confidentiality agreements with employees, collaborators and consultants, we cannot assure you that our proprietary information will not be disclosed, or that we can meaningfully protect our trade secrets.
While we seek to protect our proprietary information by entering into confidentiality agreements with employees, collaborators and consultants, we cannot assure you that our proprietary information will not be disclosed, or that we can 29 meaningfully protect our trade secrets.
Risks Related to Our Intellectual Property • If we are unable to adequately protect our intellectual property, third parties may be able to use our products and technologies, which could adversely affect our ability to compete in the market. 18 Risks Related to Our Employees and Facilities • The loss of key personnel or the inability to attract and retain additional personnel could impair our ability to operate and expand our operations.
Risks Related to Our Intellectual Property • If we are unable to adequately protect our intellectual property, third parties may be able to use our products and technologies, which could adversely affect our ability to compete in the market. 17 Risks Related to Our Employees and Facilities • The loss of key personnel or the inability to attract and retain additional personnel could impair our ability to operate and expand our operations.
Furthermore, we, one of our collaborators or a regulatory agency with jurisdiction over the trials may suspend clinical trials at any time if the subjects or patients participating in such trials are being exposed to unacceptable health risks or for other reasons. Any nonclinical or clinical test may fail to produce results satisfactory to the FDA or foreign regulatory authorities.
Furthermore, we, one of our collaborators or a regulatory agency with jurisdiction over the trials may suspend clinical trials at any time if the subjects or patients participating in such trials are being exposed to unacceptable health risks or for other reasons. Any preclinical or clinical test may fail to produce results satisfactory to the FDA or foreign regulatory authorities.
Nonclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval. The FDA or institutional review boards at the medical institutions and healthcare facilities where we or our collaborators sponsor clinical trials may suspend any trial indefinitely if they find deficiencies in the conduct of these trials.
Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval. The FDA or institutional review boards at the medical institutions and healthcare facilities where we or our collaborators sponsor clinical trials may suspend any trial indefinitely if they find deficiencies in the conduct of these trials.
If milestones are not achieved or our collaborators are unable to successfully develop and commercialize products from which milestones and royalties are payable, we will not earn the revenues contemplated by those arrangements. 28 We have limited or no control over the resources that any third party may devote to the development and commercialization of products under our collaborations.
If milestones are not achieved or our collaborators are unable to successfully develop and 27 commercialize products from which milestones and royalties are payable, we will not earn the revenues contemplated by those arrangements. We have limited or no control over the resources that any third party may devote to the development and commercialization of products under our collaborations.
Regardless of merit or eventual outcome, product liability claims could result in decreased demand for our products and product candidates, injury to our reputation, withdrawal of patients from our clinical trials, product recall, substantial monetary awards to third parties and the inability to commercialize any products that we may develop.
Regardless of merit or eventual outcome, product liability claims could result in decreased demand for INPEFA or our other products and product candidates, injury to our reputation, withdrawal of patients from our clinical trials, product recall, substantial monetary awards to third parties and the inability to commercialize any products that we may develop.
The interests of Invus and its affiliates may not be aligned with the interests of other holders of our common stock. 33 Invus has additional rights under its stockholders ’ agreement relating to the membership of our board of directors and under our certificate of incorporation relating to preemptive and consent rights, which provide Invus with substantial influence over significant corporate matters.
The interests of Invus and its affiliates may not be aligned with the interests of other holders of our common stock. 32 Invus has additional rights under its stockholders ’ agreement relating to the membership of our board of directors and under our certificate of incorporation relating to preemptive and consent rights, which provide Invus with substantial influence over significant corporate matters.
We rely on clinical research organizations and other third-party contractors to carry out many of our drug development activities, including the performance of nonclinical laboratory and animal tests under the FDA’s current Good Laboratory Practices regulations and the conduct of clinical trials of our drug candidates in accordance with protocols we establish.
We rely on clinical research organizations and other third-party contractors to carry out many of our drug development activities, including the performance of preclinical laboratory and animal tests under the FDA’s current Good Laboratory Practices regulations and the conduct of clinical trials of our drug candidates in accordance with protocols we establish.
These effects could have a material impact on our operations. 25 Risks Related to Our Capital Requirements and Financial Results We will need additional capital in the future and, if it is unavailable, we will be forced to delay, reduce or eliminate our research and development programs.
These effects could have a material impact on our operations. 24 Risks Related to Our Capital Requirements and Financial Results We will need additional capital in the future and, if it is unavailable, we will be forced to delay, reduce or eliminate our research and development programs.
Under its stockholders’ agreement, Invus has the right to designate a number of directors equal to the percentage of all the outstanding shares of our common stock owned by Invus and its affiliates, rounded up to the nearest whole number of directors. Invus has designated three of the nine current members of our board of directors.
Under its stockholders’ agreement, Invus has the right to designate a number of directors equal to the percentage of all the outstanding shares of our common stock owned by Invus and its affiliates, rounded up to the nearest whole number of directors. Invus has designated three of the eight current members of our board of directors.
Clinical trials are inherently risky and the results from nonclinical testing of a drug candidate that is under development may not be predictive of results that will be obtained in human clinical trials. In addition, the results of early human clinical trials may not be predictive of results that will be obtained in larger-scale, advanced stage clinical trials.
Clinical trials are inherently risky and the results from preclinical testing of a drug candidate that is under development may not be predictive of results that will be obtained in human clinical trials. In addition, the results of early human clinical trials may not be predictive of results that will be obtained in larger-scale, advanced stage clinical trials.
We may be held liable if any product that we or our collaborators develop or commercialize, or any product that is made with the use or incorporation of any of our technologies, causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing or sale.
We may be held liable if INPEFA or any other product that we or our collaborators develop or commercialize, or any other product that is made with the use or incorporation of any of our technologies, causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing or sale.
In addition, if one or more of the factors above negatively affects sotagliflozin sales, our business and financial condition could be materially harmed and we may be more heavily dependent on the success of our other drug programs.
In addition, if one or more of the factors above negatively affects INPEFA sales, our business and financial condition could be materially harmed and we may be more heavily dependent on the success of our other drug programs.
The trading price of our common stock has been highly volatile, and we believe the trading price of our common stock will remain highly volatile and may fluctuate substantially due to factors such as the following, many of which we cannot control: • results or delays in our or our collaborators’ clinical trials; • the announcement of FDA approval or non-approval, or delays in the FDA review process, of our or our collaborators’ drug candidates or those of our competitors or actions taken by regulatory agencies with respect to our, our collaborators’ or our competitors’ clinical trials; • actions taken by regulatory agencies with respect to sotagliflozin, LX9211 and our other drug candidates; • the announcement of new products by our competitors; • quarterly variations in our or our competitors’ results of operations; • developments in our relationships with our collaborators, including conflicts, litigation or the termination or modification of our agreements; • the announcement of an in-licensed drug candidate or strategic acquisition; • litigation, including intellectual property infringement and misappropriation, and product liability lawsuits, involving us; • failure to achieve operating results projected by securities analysts; 34 • changes in earnings estimates or recommendations by securities analysts; • the satisfaction of outstanding debt obligations or entry into new financing arrangements; • developments in the biotechnology or pharmaceutical industry; • sales of large blocks of our common stock or sales of our common stock by our executive officers, directors and significant stockholders; • departures of key personnel or board members; • FDA or international regulatory actions; • third-party coverage and reimbursement policies; • disposition of any of our drug programs or other technologies; and • other factors, including general market, economic and political conditions and other factors unrelated to our operating performance or the operatin g performance of our competitors.
The trading price of our common stock has been highly volatile, and we believe the trading price of our common stock will remain highly volatile and may fluctuate substantially due to factors such as the following, many of which we cannot control: • the commercial success of INPEFA and the revenues we generate from sales of INPEFA; • results or delays in our or our collaborators’ clinical trials; • the announcement of FDA approval or non-approval, or delays in the FDA review process, of our or our collaborators’ drug candidates or those of our competitors or actions taken by regulatory agencies with respect to our, our collaborators’ or our competitors’ clinical trials; • actions taken by regulatory agencies with respect to sotagliflozin, LX9211, LX9851 and our other drug candidates; • the announcement of new products by our competitors; • quarterly variations in our or our competitors’ results of operations; • developments in our relationships with our collaborators, including conflicts, litigation or the termination or modification of our agreements; • the announcement of an in-licensed drug candidate or strategic acquisition; • litigation, including intellectual property infringement and misappropriation, and product liability lawsuits, involving us; 33 • failure to achieve operating results projected by securities analysts; • changes in earnings estimates or recommendations by securities analysts; • the satisfaction of outstanding debt obligations or entry into new financing arrangements; • developments in the biotechnology or pharmaceutical industry; • sales of large blocks of our common stock or sales of our common stock by our executive officers, directors and significant stockholders; • departures of key personnel or board members; • FDA or international regulatory actions; • third-party coverage and reimbursement policies; • disposition of any of our drug programs or other technologies; and • other factors, including general market, economic and political conditions and other factors unrelated to our operating performance or the operatin g performance of our competitors.
Negative or inconclusive results from a nonclinical study or a clinical trial could cause us, our collaborators or the FDA or other equivalent foreign regulatory agencies to terminate a nonclinical study or clinical trial or require that we or our collaborators repeat or modify it.
Negative or inconclusive results from a preclinical study or a clinical trial could cause us, our collaborators or the FDA or other equivalent foreign regulatory agencies to terminate a preclinical study or clinical trial or require that we or our collaborators repeat or modify it.
Furthermore, prior to approving 20 a new drug, the FDA typically requires that the efficacy of the drug be demonstrated in two double-blind, controlled studies. The regulatory process also requires nonclinical testing, and data obtained from nonclinical and clinical activities are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval.
Furthermore, prior to approving a new drug, the FDA typically requires that the efficacy of the drug be demonstrated in two double-blind, controlled studies. The regulatory process also requires preclinical testing, and data obtained from preclinical and clinical activities are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval.
If we are unable to establish a strategic collaboration or other arrangement for that purpose, our capital needs will be substantially higher and we may be unable to obtain financing sufficient to fund Phase 3 development of LX9211 in neuropathic pain on acceptable terms, or at all, or may be required to reduce the scope of any such Phase 3 development program. • We have a history of net losses, and we expect to continue to incur net losses and may not achieve or maintain profitability.
If we are unable to establish a strategic collaboration or other arrangement for that purpose, our capital needs will be substantially higher and we may be unable to obtain financing sufficient to fund Phase 3 development of LX9211 on acceptable terms, or at all, and may be required to forego or reduce the scope of any such Phase 3 development program. • We have a history of net losses, and we expect to continue to incur net losses and may not achieve or maintain profitability.
If we are unable to establish an effective sales force, marketing infrastructure and distribution capabilities, we will not be able to successfully commercialize any products that we or our collaborators may develop.
If we are unable to maintain an effective sales force, marketing infrastructure and distribution capabilities, we will not be able to successfully commercialize any products that we or our collaborators may develop.
We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access and unintentional breaches. These threats can come from a variety of sources, ranging in sophistication from an individual hacker to a state-sponsored attack and motive (including corporate espionage).
Companies have been increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access and unintentional breaches. These threats can come from a variety of sources, ranging in sophistication from an individual hacker to a state-sponsored attack and motive (including corporate espionage).
If we are unable to maintain adequate coverage and reimbursement from third-party payers for any products that we or our collaborators may develop, our revenues and prospects for profitability will suffer.
If we are unable to establish adequate coverage and reimbursement from third-party payers for any products that we or our collaborators may develop, our revenues and prospects for profitability will suffer.
Any of these events could harm our product development efforts. We rely on third parties to carry out our nonclinical studies and clinical trials, which may harm or delay our research and development efforts.
Any of these events could harm our product development efforts. We rely on third parties to carry out our preclinical studies and clinical trials, which may harm or delay our research and development efforts.
Risks Related to Our Common Stock Invus, L.P. and its affiliates own a controlling interest in our outstanding common stock and may have interests which conflict with those of our other stockholders.
Risks Related to Our Common Stock Invus, L.P. and its affiliates own a substantial interest in our outstanding common stock and may have interests which conflict with those of our other stockholders.
To facilitate the exercise of such rights, we have agreed, upon written request from Invus, to take all necessary steps in accordance with our obligations under the stockholders’ agreement to (1) increase the number of directors to the number specified by Invus (which number shall be no greater than reasonably necessary for the exercise of Invus’ director designation rights under the stockholders’ agreement) and (2) cause the appointment to the newly created directorships of directors so designated by Invus pursuant to its rights under the stockholders’ agreement.
To facilitate the exercise of such rights, we have agreed, upon written request from Invus, to take all necessary steps in accordance with our obligations under the stockholders’ agreement to (a) increase the number of directors to the number specified by Invus (which number shall be no greater than reasonably necessary for the exercise of Invus’ director designation rights under the stockholders’ agreement) and (b) cause the appointment to the newly created directorships of directors so designated by Invus pursuant to its rights under the stockholders’ agreement.
We may be involved in patent litigation and other disputes regarding intellectual property rights and may require licenses from third parties for our planned nonclinical and clinical development and commercialization activities. We may not prevail in any such litigation or other dispute or be able to obtain required licenses.
We may be involved in patent litigation and other disputes regarding intellectual property rights and may require licenses from third parties for our planned research, development and commercialization activities. We may not prevail in any such litigation or other dispute or be able to obtain required licenses.
If our revenues, market share or other indicators of market acceptance of sotagliflozin fail to meet the expectations of investors or public market analysts, the market price of our common stock could decline.
If our revenues, market share or other indicators of market acceptance of INPEFA fail to meet the expectations of investors or public market analysts, the market price of our common stock could decline.
These or other companies or institutions could bring legal actions against us or our collaborators for damages or to stop us or our collaborators from engaging in certain nonclinical or clinical development activities or from manufacturing and marketing therapeutic products that allegedly infringe their patent rights.
These or other companies or institutions could bring legal actions against us or our collaborators for damages or to stop us or our collaborators from engaging in certain research and development activities or from manufacturing and marketing therapeutic products that allegedly infringe their patent rights.
If we are unable to establish a strategic collaboration or other arrangement for that purpose, our capital needs will be substantially higher and we may be unable to obtain financing sufficient to fund Phase 3 development of LX9211 in neuropathic pain on acceptable terms, or at all, and may be required to reduce the scope of any such Phase 3 development program.
If we are unable to establish a strategic collaboration or other arrangement for that purpose, our capital needs will be substantially higher and we may be unable to obtain financing sufficient to fund Phase 3 development of LX9211 on acceptable terms, or at all, and may be required to forego or reduce the scope of any such Phase 3 development program.
The emergence of new, more infectious and virulent variants may also negatively impact future clinical trials by impeding our ability to effectively recruit and retain patients, principal investigators and site staff due to concerns for patient safety and prioritization of healthcare resources toward the COVID-19 pandemic.
The emergence of new, more infectious and virulent variants may also negatively impact future clinical trials by impeding our ability to effectively recruit and retain patients, principal investigators and site staff due to concerns for patient safety and prioritization of healthcare resources.
In addition, significant delays in the development of our drug candidates could allow our competitors to bring products to market before us, which would impair our or our collaborators’ ability to commercialize our drug candidates. Any products that we or our collaborators develop will compete in highly competitive markets.
In addition, significant delays in the development of our drug candidates could allow our competitors to bring products to market before us, which would impair our or our collaborators’ ability to commercialize our drug candidates. INPEFA competes and any additional products that we or our collaborators develop will compete in highly competitive markets.
Our products and those of our collaborators, as well as our nonclinical and clinical development efforts, may give rise to claims that they infringe or misappropriate the patents or other intellectual property rights of others.
Our products and those of our collaborators, as well as our research and development efforts, may give rise to claims that they infringe or misappropriate the patents or other intellectual property rights of others.
A number of factors, many of which we cannot control, could subject our operating results to volatility, including: • the success of our commercial launch of sotagliflozin in the United States for the treatment of heart failure, if approved; • the success of our ongoing nonclinical and clinical development efforts and our ability to obtain regulatory approval of our drug candidates as a result of such efforts, including for sotagliflozin for the treatment of heart failure; • the timing and amount of expenses incurred with respect to our nonclinical and clinical development and commercialization efforts; • our success in establishing new collaborations and technology licenses and the timing and financial terms of such arrangements; • the timing and willingness of our collaborators to commercialize pharmaceutical products that would result in milestone payments and royalties; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our products and technologies; and • general and industry-specific economic conditions, which may affect our and our collaborators’ research and development expenditures.
A number of factors, many of which we cannot control, could subject our operating results to volatility, including: • the success of our commercialization of INPEFA for the treatment of heart failure; • the success of our ongoing research and development efforts and our ability to obtain regulatory approval of our drug candidates as a result of such efforts; • the timing and amount of expenses incurred with respect to our research, development and commercialization efforts; • our success in establishing new collaborations and technology licenses and the timing and financial terms of such arrangements; • the timing and willingness of our collaborators to commercialize pharmaceutical products that would result in milestone payments and royalties; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our products and technologies; and • general and industry-specific economic conditions, which may affect our and our collaborators’ research and development expenditures.
Our fifth amended and restated certificate of incorporation also grants holders of 20% or more of our issued and outstanding common stock customary preemptive rights and consent rights prior to us taking any of the following actions: (1) creating or issuing any new class or series of shares of capital stock (or securities convertible into or exercisable for shares of capital stock) having rights, preferences or privileges senior to or on parity with the common stock, (2) subject to certain exceptions, repurchasing, retiring, redeeming or otherwise acquiring any equity securities (or securities convertible into or exchangeable for equity securities) or any subsidiary and (3) adopting, or proposing to adopt, or maintaining any shareholders’ rights plan, “poison pill” or other similar plan or agreement, unless such stockholder is exempt from such plan or agreement.
Our certificate of incorporation also grants holders of 20% or more of our issued and outstanding common stock customary preemptive rights and consent rights prior to us taking any of the following actions: (a) creating or issuing any new class or series of shares of capital stock (or securities convertible into or exercisable for shares of capital stock) having rights, preferences or privileges senior to or on parity with the common stock, (b) subject to certain exceptions, repurchasing, retiring, redeeming or otherwise acquiring any equity securities (or securities convertible into or exchangeable for equity securities) or any subsidiary and (c) adopting, or proposing to adopt, or maintaining any shareholders’ rights plan, “poison pill” or other similar plan or agreement, unless such stockholder is exempt from such plan or agreement.
This growth would place significant demands on our management, operational and financial resources, and our current and planned personnel, systems, procedures and controls may not be adequate to support our growth.
This growth will likely place significant demands on our management, operational and financial resources, and our current and planned personnel, systems, procedures and controls may not be adequate to support our growth.
Invus, L.P. and its affiliates, which we collectively refer to as Invus, currently own approximately 50.5% of the outstanding shares of our common stock and are thereby able to control the election and removal of our directors and determine our corporate and management policies, including potential mergers or acquisitions, asset sales, the amendment of our articles of incorporation or bylaws and other significant corporate transactions.
Invus, L.P. and its affiliates, which we collectively refer to as Invus, currently own approximately 50% of the outstanding shares of our common stock and are thereby able to exert substantial control over the election and removal of our directors and determination of our corporate and management policies, including potential mergers or acquisitions, asset sales, the amendment of our articles of incorporation or bylaws and other significant corporate transactions.
However, competitors may challenge the validity of those trademarks and other brand names in which we have invested or may invest. Such challenges can be expensive and may adversely affect our ability to maintain the goodwill gained in connection with a particular trademark.
We rely on registered trademarks to protect our investment in our brand and goodwill. However, competitors may challenge the validity of those trademarks and other brand names in which we have invested or may invest. Such challenges can be expensive and may adversely affect our ability to maintain the goodwill gained in connection with a particular trademark.
We will need to increase our commercial, medical, clinical, and other personnel, and recruiting and retaining qualified individuals is difficult. If we are unable to manage our growth effectively, or are unsuccessful in recruiting qualified personnel when advisable, our business, financial condition, results of operations and prospects may be adversely affected.
We have increased our commercial, medical, clinical, and other personnel, and recruiting and retaining qualified individuals is difficult. If we are unable to manage our growth effectively, or are unsuccessful in recruiting or retaining qualified personnel when advisable, our business, financial condition, results of operations and prospects may be adversely affected.
Our drug candidates have been manufactured in relatively small quantities for nonclinical and clinical trials. If any of these drug candidates, including sotagliflozin, are approved by the FDA or other regulatory agencies for commercial sale, we or our collaborators will need to manufacture them in larger quantities.
Our drug candidates other than INPEFA have been manufactured in relatively small quantities for preclinical and clinical trials. If any of these drug candidates are approved by the FDA or other regulatory agencies for commercial sale, we or our collaborators will need to manufacture them in larger quantities.
Clinical trials must be conducted in accordance with the FDA’s current Good Clinical Practices. The FDA and these institutional review boards have authority to oversee our and our collaborators’ clinical trials, and the FDA may require large numbers of subjects or patients.
Clinical trials must be conducted in accordance with the FDA’s cGCP requirements. The FDA and these institutional review boards have authority to oversee our and our collaborators’ clinical trials, and the FDA may require large numbers of subjects or patients.
In addition, there may be drug candidates of which we are not aware at an earlier stage of development that may compete with our drug candidates. The outbreak of the novel coronavirus, or COVID-19, has had an adverse impact on our business operations and clinical trials and it could continue to adversely affect our business in the future.
In addition, there may also be drug candidates of which we are not aware at an earlier stage of development that may compete with our drugs and drug candidates. The outbreak of the novel coronavirus, or COVID-19, had an adverse impact on our business operations and clinical trials and another novel coronavirus could adversely affect our business in the future.
If additional capital is not available on reasonable terms, we will be forced to obtain funds, if at all, by entering into financing agreements on unattractive terms. As of December 31, 2022, we had $138.4 million in cash, cash equivalents and investments.
If additional capital is not available on reasonable terms, we will be forced to obtain funds, if at all, by entering into financing agreements on unattractive terms. As of December 31, 2023, we had $170.0 million in cash, cash equivalents and investments.
If we do not achieve commercial success with sotagliflozin, our business will suffer and our stock price will likely decline. • Clinical testing of our drug candidates in humans is an inherently risky and time-consuming process that may fail to demonstrate safety and efficacy, which could result in the delay, limitation or prevention of regulatory approval. • Our drug candidates are subject to a lengthy and uncertain regulatory process that may not result in the necessary regulatory approvals, which could adversely affect our and our collaborators’ ability to commercialize products. • We are subject to certain healthcare laws, regulation and enforcement; our failure to comply with those laws could have a material adverse effect on our results of operations and financial condition. • Our competitors may develop products that impair the value of any products that we or our collaborators may develop.
If we fail to successfully complete and obtain positive results from the PROGRESS clinical trial on our expected timeline, our business will suffer and our stock price will likely decline. • Clinical testing of our drug candidates in humans is an inherently risky and time-consuming process that may fail to demonstrate safety and efficacy, which could result in the delay, limitation or prevention of regulatory approval. • Our drug candidates are subject to a lengthy and uncertain regulatory process that may not result in the necessary regulatory approvals, which could adversely affect our and our collaborators’ ability to commercialize products. • We are subject to certain healthcare laws, regulation and enforcement; our failure to comply with those laws could have a material adverse effect on our results of operations and financial condition. • Our competitors may develop products that impair the value of any products that we or our collaborators may develop.
We will rely on selected manufacturers to deliver materials on a timely basis and to comply with applicable regulatory requirements, including the current Good Manufacturing Practices of the FDA, which relate to manufacturing and quality control activities.
We will rely on selected manufacturers to deliver materials on a timely basis and to comply with applicable regulatory requirements, including the cGMP regulations of the FDA, which relate to manufacturing and quality control activities.
Although difficult to accurately predict, the amount of our future capital requirements will be substantial and will depend on many factors, including: • the success of our commercial launch of sotagliflozin in the United States for the treatment of heart failure, if approved; • the timing, progress and results of our clinical trials of sotagliflozin, LX9211 and our other drug candidates and our ability to obtain necessary regulatory approvals based on such clinical trials, including for sotagliflozin for the treatment of heart failure; • our success in establishing new collaborations and licenses; • the amount and timing of our research, development and commercialization expenditures; • the effect of competing programs and products, and of technological and market developments; and • the filing, maintenance, prosecution, defense and enforcement of patent claims and other intellectual property rights.
Although difficult to accurately predict, the amount of our future capital requirements will be substantial and will depend on many factors, including: • the success of our commercialization of INPEFA for the treatment of heart failure; • the success of our commercial launch of sotagliflozin for patients with type 1 diabetes and CKD, if approved; • the timing, progress and results of our research and development efforts for sotagliflozin, LX9211, LX9851 and our other drug candidates and our ability to obtain necessary regulatory approvals based on clinical trials of those drug candidates; • our success in establishing new collaborations and licenses; • the amount and timing of our research, development and commercialization expenditures; • the effect of competing programs and products, and of technological and market developments; and • the filing, maintenance, prosecution, defense and enforcement of patent claims and other intellectual property rights.
In addition, the Oxford Term Loans require that we comply with certain affirmative and restrictive covenants, including a financial covenant relating to net sales of sotagliflozin following regulatory approval and additional covenants restricting dispositions, fundamental changes in our business, mergers or acquisitions, indebtedness, encumbrances, distributions, investments, transactions with affiliates and subordinated debt, any of which could restrict our business and operations, particularly our ability to respond to changes in our business or to take specified actions to take advantage of certain business opportunities that may be presented to us.
In addition, the Oxford Term Loans require that we comply with certain affirmative and restrictive covenants, including financial covenants relating to net sales of INPEFA and minimum cash balance requirements and additional covenants restricting dispositions, fundamental changes in our business, mergers or acquisitions, indebtedness, encumbrances, distributions, investments, transactions with affiliates and subordinated debt, any of which could restrict our business and operations, particularly our ability to respond to changes in our business or to take specified actions to take advantage of certain business opportunities that may be presented to us.
We expect that our principal competition for sotagliflozin for the treatment of heart failure would include such selective SGLT2 inhibitors which have already received or may gain regulatory approval for the treatment of heart failure, as well as other classes of drugs used in the treatment of heart failure, such as the combination drug sacubitril/valsartan, currently marketed for the treatment of heart failure by Novartis, and vericiguat, currently marketed for the treatment of heart failure by Merck.
Our principal competition for INPEFA for the treatment of heart failure includes such selective SGLT2 inhibitors which have already received or may gain regulatory approval for the treatment of heart failure, as well as other classes of drugs used in the treatment of heart failure, such as the combination drug sacubitril/valsartan, currently marketed for the treatment of heart failure by Novartis, and vericiguat, currently marketed for the treatment of heart failure by Merck.
In addition, there are a limited number of manufacturers that operate under the FDA’s current Good Manufacturing Practices and that are capable of producing such materials, and we may experience difficulty finding manufacturers with adequate capacity for our needs.
In addition, there are a limited number of manufacturers that operate under the FDA’s cGMP regulations and that are capable of producing such materials, and we may experience difficulty finding manufacturers with adequate capacity for our needs.
In addition, we or our collaborators must manufacture, or contract for the manufacture of, the drug candidates that we use in our clinical trials under the FDA’s current Good Manufacturing Practices. The rate of completion of clinical trials is dependent, in part, upon the rate of enrollment of patients.
In addition, we or our collaborators must manufacture, or contract for the manufacture of, the drug candidates that we use in our clinical trials under the FDA’s cGMP requirements. The rate of completion of clinical trials is dependent, in part, upon the rate of enrollment of patients.
For example, publicly available information, such as information in issued patents, published patent applications and scientific literature, can be used by third parties to independently develop technology and we cannot provide assurance that any such independently developed technology will not be equivalent or superior to our proprietary technology. 30 We rely on registered trademarks to protect our investment in our brand and goodwill.
For example, publicly available information, such as information in issued patents, published patent applications and scientific literature, can be used by third parties to independently develop technology and we cannot provide assurance that any such independently developed technology will not be equivalent or superior to our proprietary technology.
Due to the likelihood of fluctuations in our revenues and expenses, we believe that period-to-period comparisons of our operating results are not a good indication of our future performance. 27 We have substantial indebtedness that may limit cash flow available to invest in the ongoing needs of our business. We have incurred $48.9 milli on of indebtedness.
Due to the likelihood of fluctuations in our revenues and 26 expenses, we believe that period-to-period comparisons of our operating results are not a good indication of our future performance. We have substantial indebtedness that may limit cash flow available to invest in the ongoing needs of our business. We have incurred $99.5 million of indebtedness.
We have incurred aggregate net losses since our inception, including an aggregate net loss of $248.3 million for the three years ended December 31, 2022. As o f December 31, 2022, we had an accumulated deficit of $1.6 billion.
We have incurred aggregate net losses since our inception, including an aggregate net loss of $366.8 million for the three years ended December 31, 2023. As o f December 31, 2023, we had an accumulated deficit of $1.8 billion.
Factors that may hinder efforts to effectively establish, manage and maintain such infrastructure for products that we or our collaborators may develop include: • inability to recruit, retain and effectively manage adequate numbers of effective sales and marketing personnel; • inability to maintain relationships with third-party logistics providers, pharmacies, third-party manufacturers and other third parties instrumental in the commercial manufacture and distribution of such products; • inability to establish or implement internal controls and procedures required in connection with sales of such products; • inability of sales personnel to obtain access to or convince adequate numbers of physicians to prescribe such products; and • potential lack of complementary products to be offered by sales personnel, which may put us or our collaborators at a competitive disadvantage relative to companies with more extensive product lines. 21 If we or our collaborators are unable to sustain our or their sales force, marketing infrastructure and distribution capability for such products, we may not be able to generate any product revenue, may generate increased expenses and may never become profitable.
Factors that may hinder efforts to effectively establish, manage and maintain such infrastructure for products that we or our collaborators may develop include: • inability to recruit, retain and effectively manage adequate numbers of effective sales and marketing personnel; 20 • inability to maintain relationships with third-party logistics providers, pharmacies, third-party manufacturers and other third parties instrumental in the commercial manufacture and distribution of such products; • inability to establish or implement internal controls and procedures required in connection with sales of such products; • inability of sales personnel to obtain access to or convince adequate numbers of physicians to prescribe such products; and • potential lack of complementary products to be offered by sales personnel, which may put us or our collaborators at a competitive disadvantage relative to companies with more extensive product lines.
Risks Related to Our Capital Requirements and Financial Results • We will need additional capital in the future and, if it is unavailable, we will be forced to delay, reduce or eliminate our research and development programs. • We do not have sufficient capital to support a full Phase 3 development program for LX9211 in neuropathic pain.
Risks Related to Our Capital Requirements and Financial Results • We will need additional capital in the future and, if it is unavailable, we will be forced to delay, reduce or eliminate our research and development programs. • We may not have sufficient capital to support Phase 3 development of LX9211.
If approved, we expect that a significant portion of our total revenues will be attributable to sales of sotagliflozin for heart failure in the United States, but we cannot be certain that sotagliflozin will be commercially successful.
We expect that a significant portion of our total revenues for the next several years will be attributable to sales of INPEFA for heart failure in the United States, but we cannot be certain that INPEFA will be commercially successful.
If approved, we will depend heavily on the commercial success of sotagliflozin in heart failure. If we do not achieve commercial success with sotagliflozin, our business will suffer and our stock price will likely decline.
Risks Related to Our Business and Industry We depend heavily on the commercial success of INPEFA in heart failure. If we do not achieve commercial success with INPEFA, our business will suffer and our stock price will likely decline.
When an entity is determined to have violated the civil False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. 23 If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we, or our officers or employees, may be subject to penalties, including administrative civil and criminal penalties, damages, fines, withdrawal of regulatory approval, the curtailment or restructuring of our operations, the exclusion from participation in Medicare, Medicaid and other federal and state healthcare programs, individual imprisonment, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to sell our products or operate our business and also adversely affect our financial results.
If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we, or our officers or employees, may be subject to penalties, including administrative civil and criminal penalties, damages, fines, withdrawal of regulatory approval, the curtailment or restructuring of our operations, the exclusion from participation in Medicare, Medicaid and other federal and state healthcare programs, individual imprisonment, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to sell our products or operate our business and also adversely affect our financial results.
We lack the capability to manufacture materials for nonclinical studies and clinical trials and commercial supplies for any products which gain regulatory approval. Our reliance on third parties to manufacture our drug candidates may harm or delay our research, development and commercialization efforts.
We lack the capability to manufacture commercial supplies of INPEFA and any other products which gain regulatory approval and other materials for our research and development activities relating to our drug candidates. Our reliance on third parties to manufacture our drugs and drug candidates may harm or delay our research, development and commercialization efforts.
This summary does not include all of the risks we face and you should carefully review and consider the full discussion of our risk factors below, together with the other information in this annual report on Form 10-K.
This summary does not include all of the risks we face and you should carefully review and consider the full discussion of our risk factors below, together with the other information in this annual report on Form 10-K. Risks Related to Our Business and Industry • We depend heavily on the commercial success of INPEFA in heart failure.
If any disaster were to occur, our ability to operate our business at our facilities could be seriously, or potentially completely, impaired. Risks Related to Environmental and Product Liability We have used hazardous chemicals and radioactive and biological substances in our business. Any claims relating to improper handling, storage or disposal of these substances could be time consuming and costly.
Risks Related to Environmental and Product Liability We have used hazardous chemicals and radioactive and biological substances in our business. Any claims relating to improper handling, storage or disposal of these substances could be time consuming and costly.
Risks Related to Our Employees and Facilities If we are unable to manage our growth, our business, financial condition, results of operations and prospects may be adversely affected.
Risks Related to Our Employees and Facilities If we are unable to manage our growth, our business, financial condition, results of operations and prospects may be adversely affected. We have experienced and may continue to experience substantial growth in the number of our employees and in the scope of our operations.
We currently do not have the manufacturing capabilities or experience necessary to produce materials for nonclinical studies or clinical trials or commercial supplies for any products which gain regulatory approval and intend in the future to continue to rely on collaborators and third-party contractors to produce such materials.
We currently do not have the manufacturing capabilities or experience necessary to produce commercial supplies of INPEFA and any other products which gain regulatory approval and other materials for our research and development activities relating to our drug candidates and intend in the future to continue to rely on collaborators and third-party contractors to produce such materials.
Risks Related to Our Business and Industry We depend heavily on our ability to obtain regulatory approval in the United States for sotagliflozin in heart failure. If we fail to obtain such regulatory approval, our business will suffer and our stock price will likely decline.
We depend heavily on our ability to obtain regulatory approval in the United States for sotagliflozin in patients with type 1 diabetes and CKD. If we fail to obtain such regulatory approval, our business will suffer and our stock price will likely decline.
Furthermore, regulatory approval in the United States for sotagliflozin, even if obtained, may limit the type of patients in which sotagliflozin may be used or otherwise require specific warning or labeling language, any of which may reduce the commercial potential of sotagliflozin in heart failure.
Furthermore, regulatory approval in the United States for sotagliflozin, even if obtained, may further limit the types of patients in which sotagliflozin may be used or otherwise require specific 18 warning or labeling language, such as with respect to the risk of diabetic ketoacidosis, any of which may reduce the commercial potential of sotagliflozin in type 1 diabetes.
Competition is intense for experienced commercial, medical and clinical personnel, and we may be unable to retain or recruit such personnel with the expertise or experience necessary to allow us to successfully develop and commercialize our products.
Competition is intense for experienced commercial, medical and clinical personnel, and we may be unable to retain or recruit such personnel with the 31 expertise or experience necessary to allow us to successfully develop and commercialize our products. Further, all of our employees are employed “at will” and, therefore, may leave our employment at any time.
In addition, the pharmaceutical and biotechnology industries, in general, have been subject to significant medical malpractice litigation. A successful product liability claim or series of claims brought against us could harm our reputation and business.
On occasion, juries have awarded large judgments in class action lawsuits for claims based on drugs that had unanticipated side effects. In addition, the pharmaceutical and biotechnology industries, in general, have been subject to significant medical malpractice litigation. A successful product liability claim or series of claims brought against us could harm our reputation and business.
Compliance with such requirements may require investment in infrastructure to ensure that tracking is performed properly, and some of these laws result in the public disclosure of various types of payments and relationships, which could potentially have a negative effect on our business and/or increase enforcement scrutiny of our activities.
Compliance with such requirements may require investment in infrastructure to ensure that tracking is performed properly, and some of these laws result in the public disclosure of various types of payments and relationships, which could potentially have a negative effect on our business and/or increase enforcement scrutiny of our activities. 22 In addition, certain marketing practices, including off-label promotion, may also violate certain federal and state health regulatory fraud and abuse laws as well as false claims laws, including the civil False Claims Act.
These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling or testing our products. We have obtained limited product liability insurance coverage for our clinical trials. However, our insurance may not reimburse us or may not be sufficient to reimburse us for expenses or losses we may suffer.
These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling or testing our products. We have obtained limited product liability insurance coverage for our commercialization of INPEFA and clinical trials of our drug candidates.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn July 2022, our subsidiary, Lexicon Pharmaceuticals (New Jersey), Inc. leased a 22,000 square-foot office space in Bridgewater, New Jersey. The term of the lease extends from February 2023 through January 2034 and provides for escalating yearly base rent payments starting at $820,000 and increasing to $986,000 in the final year of the lease.
Biggest changeIn July 2022, our subsidiary, Lexicon Pharmaceuticals (New Jersey), Inc. leased a 22,000 square-foot office space in Bridgewater, New Jersey. The term of the lease extends through January 2034 and provides for escalating yearly base rent payments starting at $820,000 and increasing to $986,000 in the final year of the lease.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Added
We are currently not aware of any material legal proceedings affecting our company.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDecember 31, 2017 2018 2019 2020 2021 2022 Lexicon Pharmaceuticals, Inc. 100 67 42 35 40 19 Nasdaq Composite Index 100 96 130 187 227 152 Nasdaq Biotechnology Index 100 91 113 142 141 126 The foregoing stock price performance comparisons shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference by any general statement incorporating by reference this annual report on Form 10-K into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that we specifically incorporate such comparisons by reference.
Biggest changeDecember 31, 2018 2019 2020 2021 2022 2023 Lexicon Pharmaceuticals, Inc. 100 63 52 59 29 23 Nasdaq Composite Index 100 135 194 236 158 226 Nasdaq Biotechnology Index 100 124 156 155 138 144 The foregoing stock price performance comparisons shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference by any general statement incorporating by reference this annual report on Form 10-K into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that we specifically incorporate such comparisons by reference.
The graph assumes that the value of the investment in our common stock and each index was $100 at December 31, 2017, and that all dividends were reinvested. The stock performance shown on the graph below represents historical performance and is not necessarily indicative of future stock price performance.
The graph assumes that the value of the investment in our common stock and each index was $100 at December 31, 2018, and that all dividends were reinvested. The stock performance shown on the graph below represents historical performance and is not necessarily indicative of future stock price performance.
Performance Graph The following performance graph compares the performance of our common stock to the Nasdaq Composite Index and the Nasdaq Biotechnology Index for the period beginning December 31, 2017 and ending December 31, 2022.
Performance Graph The following performance graph compares the performance of our common stock to the Nasdaq Composite Index and the Nasdaq Biotechnology Index for the period beginning December 31, 2018 and ending December 31, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is quoted on The Nasdaq Global Select Market under the symbol “LXRX.” As of February 27, 2023, there were approximately 257 holders of record of our common stock. We have never paid cash dividends on our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is quoted on The Nasdaq Global Select Market under the symbol “LXRX.” As of March 21, 2024, there were approximately 313 holders of record of our common stock. We have never paid cash dividends on our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

50 edited+20 added−25 removed13 unchanged
Biggest changeWe have reported positive results from a Phase 2 clinical trial of LX9211 in diabetic peripheral neuropathic pain. We have reported top-line results from a separate Phase 2 clinical trial of LX9211 in post-herpetic neuralgia which demonstrated clear evidence of effect.
Biggest changeWe have reported positive results from a Phase 2 clinical trial of LX9211 in DPNP and top-line results from a separate Phase 2 clinical trial of LX9211 in post-herpetic neuralgia which also demonstrated evidence of effect. • We are conducting preclinical development of LX9851, an orally-delivered small molecule drug candidate, as a treatment for obesity and tool for weight management. • We are conducting preclinical research and development and preparing to conduct clinical development of compounds from a number of additional drug programs originating from our internal drug discovery efforts.
Those efforts were driven by a systematic, target biology-driven approach in which we used gene knockout technologies and an integrated platform of advanced medical technologies to systematically study the physiological and behavioral functions of almost 5,000 genes in mice and assessed the utility of the proteins encoded by the corresponding human 39 genes as potential drug targets.
Those efforts were driven by a systematic, target biology-driven approach in which we used gene knockout technologies and an integrated platform of advanced medical technologies to systematically study the physiological and behavioral functions of almost 5,000 genes in mice and assessed the utility of the proteins encoded by the corresponding human genes as potential drug targets.
We estimate that drug development activities are typically completed over the following periods: Phase Estimated Completion Period Preclinical development 1-2 years Phase 1 clinical trials 1-2 years Phase 2 clinical trials 1-2 years Phase 3 clinical trials 2-4 years We expect research and development costs to remain substantial in the future as we continue to fund our nonclinical and clinical development efforts and advance new drug candidates into clinical development.
We estimate that drug development activities are typically completed over the following periods: Phase Estimated Completion Period Preclinical development 1-2 years Phase 1 clinical trials 1-2 years Phase 2 clinical trials 1-2 years Phase 3 clinical trials 2-4 years We expect research and development costs to remain substantial in the future as we continue to fund our research and development efforts and advance new drug candidates into clinical development.
Treasury bills and corporate debt 43 securities that mature three to 12 months from the time of purchase, which we believe are subject to limited market and credit risk. We currently do not hedge interest rate exposure or hold any derivative financial instruments in our investment portfolio.
Treasury bills and corporate debt securities that mature three to 12 months from the time of purchase, which we believe are subject to limited market and credit risk. We currently do not hedge interest rate exposure or hold any derivative financial instruments in our investment portfolio.
We have identified and validated in living animals, or in vivo, more than 100 targets with promising profiles for drug discovery. The drug development process takes many years to complete. The cost and length of time varies due to many factors including the type, complexity and intended use of the drug candidate.
We have identified and validated in living animals, or in vivo, more than 100 targets with promising profiles for drug discovery. 39 The drug development process takes many years to complete. The cost and length of time varies due to many factors including the type, complexity and intended use of the drug candidate.
The sale of additional equity or convertible debt securities may result in additional dilution to our stockholders. From time to time, our board of directors may authorize us to repurchase shares of our common stock.
The sale of additional equity or convertible debt securities may result in additional dilution to our stockholders. 43 From time to time, our board of directors may authorize us to repurchase shares of our common stock.
We seek to collaborate with other pharmaceutical and biotechnology companies with respect to drug discovery or the development and commercialization of certain of our drug candidates, particularly with respect to commercialization in territories outside the United States or commercialization in the United States for indications treated by primary care physicians, or when the collaboration may otherwise provide us with access to expertise and resources that we do not possess internally or are complementary to our own.
We seek to collaborate with other pharmaceutical and biotechnology companies with respect to the research, development and commercialization of certain of our drug candidates, particularly with respect to commercialization in territories outside the United States or commercialization in the United States for indications treated by primary care physicians, or when the collaboration may otherwise provide us with access to expertise and resources that we do not possess internally or are complementary to our own.
We record significant accrued liabilities related to unbilled expenses for products or services that we have received from service providers, specifically related to ongoing nonclinical studies and clinical trials. These costs primarily relate to clinical study management, monitoring, laboratory and analysis costs, drug supplies, toxicology studies and investigator grants.
We record significant accrued liabilities related to unbilled expenses for products or services that we have received from service providers, specifically related to ongoing preclinical studies and clinical trials. These costs primarily relate to clinical study management, monitoring, laboratory and analysis costs, drug supplies, toxicology studies and investigator grants.
We seek to retain exclusive or co-exclusive rights to the benefits of certain drug discovery and development programs by developing and commercializing drug candidates from those programs internally, particularly in the United States for indications treated by specialist physicians.
We seek to retain exclusive or co-exclusive rights to the benefits of certain research and development programs by developing and commercializing drug candidates from those programs internally, particularly in the United States for indications treated by specialist physicians.
We describe our significant accounting policies more fully in Note 2, "Summary of Significant Accounting Policies," to the Consolidated Financial Statements included in this Annual Report on Form 10-K. Research and Development Expenses Research and development expenses consist of costs incurred for research and development activities solely sponsored by us as well as collaborative research and development activities.
We describe our significant accounting policies more fully in Note 2, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included in this Annual Report on Form 10-K. Research and Development Expenses Research and development expenses consist of costs incurred for research and development activities solely sponsored by us as well as collaborative research and development activities.
Research and development expenses consist primarily of salaries and related personnel costs, external research costs related to our nonclinical and clinical efforts, material costs, facility costs, depreciation on property and equipment, and other expenses related to our drug discovery and development programs.
Research and development expenses consist primarily of salaries and related personnel costs, external research costs related to our preclinical and clinical efforts, material costs, facility costs, depreciation on property and equipment, and other expenses related to our drug discovery and development programs.
If we are unable to obtain adequate financing when needed, we may have to delay or reduce the scope of one or more of our clinical trials, or research and development programs. Additional financing may not be available on terms acceptable to us or at all.
If we are unable to obtain adequate financing when needed, we may have to delay or reduce the scope of our commercialization efforts or one or more of our clinical trials and other research and development programs. Additional financing may not be available on terms acceptable to us or at all.
We have identified and validated in living animals, or in vivo, more than 100 targets with promising profiles for drug discovery. We are working both independently and through collaborations and strategic alliances with third parties to capitalize on our drug target discoveries and drug discovery and development programs.
We have identified and validated in living animals, or in vivo, more than 100 targets with promising profiles for drug discovery. We have worked both independently and through collaborations and strategic alliances with third parties to capitalize on our drug target discoveries and research and development programs.
Sotagliflozin and compounds from a number of additional drug programs originated from our own internal drug discovery efforts, and LX9211 originated from our collaborative neuroscience drug discovery efforts with Bristol-Myers Squibb.
INPEFA, LX9851 and compounds from a number of additional drug programs originated from our own internal drug discovery efforts, and LX9211 originated from our collaborative neuroscience drug discovery efforts with Bristol-Myers Squibb.
LX9211 originated from our collaborative neuroscience drug discovery efforts with Bristol-Myers Squibb, and sotagliflozin and compounds from a number of additional drug programs originated from our own internal drug discovery efforts.
INPEFA, LX9851 and compounds from a number of additional drug programs originated from our own internal drug discovery efforts, and LX9211 originated from our collaborative neuroscience drug discovery efforts with Bristol-Myers Squibb.
We may have multiple drugs in concurrent nonclinical studies and clinical trials at clinical sites throughout the world. In order to ensure that we have adequately provided for ongoing nonclinical and clinical development costs during the period in which we incur such costs, we maintain accruals to cover these expenses.
We may have multiple drug candidates in concurrent preclinical studies and clinical trials at clinical sites throughout the world. In order to ensure that we have adequately provided for ongoing preclinical and clinical development costs during the period in which we incur such costs, we maintain accruals to cover these expenses.
Since our inception, we have incurred significant losses and, as of December 31, 2022, we had an accumulated deficit of $1.6 billion.
Since our inception, we have incurred significant losses and, as of December 31, 2023, we had an accumulated deficit of $1.8 billion.
Substantial portions of our nonclinical studies and clinical trials are performed by third party laboratories, medical centers, contract research organizations and other vendors. For nonclinical studies, we accrue expenses based upon estimated percentage of work completed and the contract milestones remaining. For clinical studies, expenses are accrued based upon the number of patients enrolled and the duration of the study.
Substantial portions of our preclinical studies and clinical trials are performed by third party laboratories, medical centers, contract research organizations and other vendors. For preclinical studies, we accrue expenses based upon estimated percentage of work completed and the contract milestones remaining.
We may determine, as we have with certain of our drug candidates, that our interests are better served by retaining rights to our discoveries and advancing our therapeutic programs to a later stage, which could limit our near-term revenues and increase expenses.
We may determine, as we have with INPEFA in heart failure, that our interests are better served by retaining rights to our discoveries and advancing our therapeutic programs to a later stage, which could limit our near-term revenues and increase expenses.
Interest and other income, net was $1.6 million and $0.1 million in the years ended December 31, 2022 and 2021, respectively. Net Loss and Net Loss per Common Share Net loss was $101.9 million, or a loss of $0.62 per share, in 2022, as compared to a net loss of $87.8 million, or $0.60 per share in 2021.
Interest income and other, net was $7.7 million and $1.6 million in the years ended December 31, 2023 and 2022, respectively. Net Loss and Net Loss per Common Share Net loss was $177.1 million, or a loss of $0.80 per share, in 2023, as compared to a net loss of $101.9 million, or $0.62 per share in 2022.
Our future capital requirements will be substantial and will depend on many factors, including the success of our planned commercial launch of sotagliflozin in heart failure, if approved,; the success of our ongoing nonclinical and clinical development efforts and the ability to obtain necessary regulatory approvals of the drug candidates which are the subject of such efforts; our success in establishing new collaborations and licenses and our receipt of milestones, royalties and other payments under such arrangements; the amount and timing of our research, development and commercialization expenditures; the resources we devote to developing and supporting our products and other factors.
Our future capital requirements will be substantial and will depend on many factors, including the success of our commercialization of INPEFA in the United States; the success of our commercial launch of sotagliflozin for patients with type 1 diabetes and CKD, if approved; the success of our ongoing research and development efforts and the ability to obtain necessary regulatory approvals of the drug candidates which are the subject of such efforts; our success in establishing new collaborations and licenses and our receipt of milestones, royalties and other payments under such arrangements; the amount and timing of our research, development and commercialization expenditures; the resources we devote to commercializing, developing and supporting our products and other factors.
Research and Development Expenses Research and development expenses and dollar and percentage changes as compared to the prior year are as follows (dollar amounts are presented in millions): Year Ended December 31, 2022 2021 2020 Total research and development expense $ 52.8 $ 55.0 $ 153.6 Dollar decrease $ (2.2) $ (98.6) Percentage decrease (4) % (64) % Research and development expenses consist primarily of third-party and other services principally related to nonclinical and clinical development activities, salaries and other personnel-related expenses, facility and equipment costs and stock-based compensation.
Research and Development Expenses Research and development expenses and dollar and percentage changes as compared to the prior year are as follows (dollar amounts are presented in millions): Year Ended December 31, 2023 2022 2021 Total research and development expense $ 58.9 $ 52.8 $ 55.0 Dollar increase (decrease) $ 6.1 $ (2.2) Percentage increase (decrease) 12 % (4) % Research and development expenses consist primarily of third-party services principally related to preclinical and clinical development activities, salaries and other personnel-related expenses, facility and equipment costs, stock-based compensation, and other costs each of which are described below.
Disclosure about Market Risk We are exposed to limited market and credit risk on our cash equivalents which have maturities of three months or less at the time of purchase. We maintain a short-term investment portfolio which consists of U.S.
Disclosure about Market Risk We are exposed to limited market and credit risk on our cash equivalents which have maturities of three months or less at the time of purchase. We had approximately $170.0 million in cash and cash equivalents and short-term investments as of December 31, 2023. We maintain a short-term investment portfolio which consists of U.S.
To date, we have generated a substantial portion of our revenues from a limited number of sources. 38 Our operating results and, in particular, our ability to generate additional revenues are dependent on many factors, including the success of our planned commercial launch of sotagliflozin in the United States for heart failure, if approved; the success of our ongoing nonclinical and clinical development efforts and the ability to obtain necessary regulatory approvals of the drug candidates which are the subject of such efforts; our success in establishing new collaborations and licenses and our receipt of milestones, royalties and other payments under such arrangements; and general and industry-specific economic conditions which may affect research, development and commercialization expenditures.
Our operating results and, in particular, our ability to generate additional revenues are dependent on many factors, including the success of our commercialization of INPEFA in the United States and the amount of revenues generated from 38 sales of INPEFA; the success of our ongoing research and development efforts and the ability to obtain necessary regulatory approvals of the drug candidates which are the subject of such efforts; our success in establishing new collaborations and licenses and our receipt of milestones, royalties and other payments under such arrangements; and general and industry-specific economic conditions which may affect research, development and commercialization expenditures.
Selling, General and Administrative Expenses Selling, general and administrative expenses and dollar and percentage changes as compared to the prior year are as follows (dollar amounts are presented in millions): Year Ended December 31, 2022 2021 2020 Total selling, general and administrative expense $ 48.1 $ 32.3 $ 47.2 Dollar increase (decrease) $ 15.8 $ (14.9) Percentage increase (decrease) 49 % (32) % Selling, general and administrative expenses consist primarily of personnel costs to support the commercialization of sotagliflozin and activities from research and development; professional and consulting fees, stock-based compensation expense, and facility and equipment costs.
Selling, General and Administrative Expenses Selling, general and administrative expenses and dollar and percentage changes as compared to the prior year are as follows (dollar amounts are presented in millions): Year Ended December 31, 2023 2022 2021 Total selling, general and administrative expense $ 114.0 $ 48.1 $ 32.3 Dollar increase $ 65.9 $ 15.8 Percentage increase 137 % 49 % Selling, general and administrative expenses consist primarily of personnel costs to support the commercialization of INPEFA and support of our research and development activities, professional and consulting fees, stock-based compensation expense, and facilities, equipment, and other costs each of which are described further below.
Interest Expense and Interest and Other Income, Net Interest Expense . Interest expense increased to $2.8 million in 2022 from $0.8 million in 2021, primarily due to the Oxford debt financings during March and December of 2022. Interest and Other Income (Expense), Net.
Interest and other expense increased to $13.1 million in 2023 from $2.8 million in 2022, primarily due to the Oxford debt financings of $25 million in December 2022 and $50 million in June 2023. Interest Income and Other, Net Interest Income and Other, Net.
We periodically evaluate the estimates to determine if adjustments are necessary or appropriate based on information we receive. Although we use consistent milestones or subject or patient enrollment to drive expense recognition, the assessment of these costs is a subjective process that requires judgment. Upon settlement, these costs may differ materially from the amounts accrued in our consolidated financial statements.
Although we use consistent milestones or subject or patient enrollment to drive expense recognition, the assessment of these costs is a subjective process that requires judgment. Upon settlement, these costs may differ materially from the amounts accrued in our consolidated financial statements. The financial terms of these agreements are subject to negotiation and vary from contract to contract.
The financial terms of these agreements are subject to negotiation and vary from contract to contract. In accruing the relevant costs, we estimated the time period over which services were to be performed and the level of effort required to complete or wind down each study.
In accruing the relevant costs, we estimated the time period over which services were to be performed and the level of effort required to complete or wind down each study. Upon completion and settlement, these costs may differ materially from the amounts accrued in our consolidated financial statements.
Upon the achievement of certain European regulatory approvals, we will be required to make certain royalty payments, totaling $4.5 million, in three equal annual installments of $1.5 million.
Other commitments. Upon the regulatory approval of sotagliflozin for the treatment of type 1 diabetes in a major market, we will be required to make certain royalty payments, totaling $4.5 million, in three equal annual installments of $1.5 million.
Selling, general and administrative expenses consist primarily of salaries and related expenses for executive, sales and marketing, and administrative personnel, professional fees and other corporate expenses, including information technology, facilities costs and general legal activities. We expect to continue to incur significant research and development costs in connection with the continuing research and development of our drug candidates.
Selling, general and administrative expenses consist primarily of salaries and related expenses for executive, sales and marketing, and administrative personnel, professional fees and other corporate expenses, including information technology, facilities costs and general legal activities.
As a result, we will need to generate significantly higher revenues to achieve profitability. Critical Accounting Policies Our Consolidated Financial Statements included in this Annual Report on Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), which require that we make numerous estimates and assumptions.
Critical Accounting Policies Our Consolidated Financial Statements included in this Annual Report on Form 10-K have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, which require that we make numerous estimates and assumptions. Actual results could differ from those estimates and assumptions, thus impacting our reported results of operations and financial position.
We expect to continue to devote substantial capital resources to prepare for the commercialization of sotagliflozin, if approved; to successfully complete our nonclinical and clinical development efforts with respect to sotagliflozin, LX9211 and our other drug candidates; and for other general corporate activities.
We expect to continue to devote substantial capital resources to the commercialization of INPEFA for heart failure, the commercial launch of sotagliflozin for patients with type 1 diabetes and CKD, if approved, the research and development of our drug candidates and for other general corporate activities.
Results of Operations – Comparison of Years Ended December 31, 2022, 2021 and 2020 The following discussion and analysis should be read with “Results of Operations” and our financial statements and notes included in our annual report on Form 10-K for the year ended December 31, 2021.
Recent Accounting Pronouncements Issued But Not Yet Adopted See Note 2, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements, for a discussion of the impact of new accounting standards issued but not yet adopted on our consolidated financial statements. 40 Results of Operations The following discussion and analysis should be read with “Results of Operations” and our financial statements and notes included in our annual report on Form 10-K for the year ended December 31, 2022.
Under our drug discovery alliance with Bristol-Myers Squibb, we will be required to make a royalty payment of $5 million upon dosing of the first patient in a Phase 3 clinical trial of LX9211 . Facilities. In February 2021, we leased a 25,000 square-foot office space in The Woodlands, Texas.
Under our drug discovery alliance with Bristol-Myers Squibb, we will be required to make a royalty payment of $5 million upon dosing of the first patient in a Phase 3 clinical trial of LX9211 . For a further discussion of our commitments and contingencies see Note 10 of the Notes to Consolidated Financial Statements.
Years Ended December 31, 2022 and 2021 • Personnel – Personnel costs increased 75% in 2022 to $18.8 million, primarily due to higher employee salaries and benefit costs as a result of increasing headcount during 2022 in preparation for commercialization of sotagliflozin.
Years Ended December 31, 2023 and 2022 • Personnel – Personnel costs increased 181% in 2023 to $53.0 million, primarily due to higher employee salaries and benefit costs as a result of increased headcount during 2023 in conjunction with the June 2023 commercial launch of INPEFA.
Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs. 41 • Stock-based compensation – Stock-based compensation expense was $4.3 million in 2022 and 2021. • Facilities and equipment – Facilities and equipment costs was $1.6 million and $1.5 million in 2022 and 2021, respectively. • Other – Other costs was $3.6 million and $3.5 million in 2022 and 2021, respectively.
Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs. • Stock-based compensation – Stock-based compensation expense increased 21% in 2023 to $5.1 million as compared to 2022, partially due to increased headcount. 41 • Facilities, equipment, and other – Facilities, equipment, and other costs relate primarily to rent, insurance, travel and training, and software licensing costs.
Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs. • Professional and consulting fees – Professional and consulting fees increased 50% in 2022 to $16.3 million, primarily as a result of higher marketing and professional and consulting fees, partially offset by lower legal fees. • Stock-based compensation – Stock-based compensation expense increased 15% in 2022 to $7.3 million, primarily due to increasing headcount in the current year. • Facilities and equipment – Facilities and equipment costs was $1.4 million in 2022 and 2021. • Other – Other costs increased 39% in 2022 to $4.3 million, primarily due to increases in travel, training and software license expenses in 2022.
Salaries, bonuses, employee benefits, payroll taxes, recruiting and relocation costs are included in personnel costs. • Professional and consulting fees – Professional and consulting fees increased 137% in 2023 to $38.7 million, primarily due to higher marketing and professional fees in conjunction with the commercial launch of INPEFA. • Stock-based compensation – Stock-based compensation expense increased 27% in 2023 to $9.2 million as compared to 2022, due to increasing headcount in the current year. • Facilities, equipment, and other – Facilities, equipment, and other costs were $13.1 million and $5.6 million in 2023 and 2022, respectively.
Liquidity and Capital Resources We have financed our operations from inception primarily through sales of common and preferred stock, contract and milestone payments we received under our collaborations and strategic licenses, target validation, database subscription and technology license agreements, product sales, government grants and contracts, and financing under debt, lease and other 42 project financing arrangements, as well as from commercial sales of our XERMELO product following its commercial launch in February 2017 until our sale of XERMELO and related assets to TerSera Therapeutics, LLC in September 2020.
Liquidity and Capital Resources We have financed our operations from inception primarily through sales of common and preferred stock, contract and milestone payments we received under our collaborations and strategic licenses, target validation, database subscription and technology license agreements, government grants and contracts, and financing under debt, lease and other project financing arrangements, as well as from commercial sales of our approved drug products. 42 In March 2022, we entered into a loan and security agreement with Oxford Finance LLC that provides up to $150 million in borrowing capacity, available in five tranches, under which $100 million has been funded under the first three tranches.
Upon completion and settlement, these costs may differ materially from the amounts accrued in our consolidated financial statements. We record our research and development costs by type or category, rather than by project. Significant categories of costs include personnel, facilities and equipment costs and third-party and other services.
We record our research and development costs by type or category, rather than by project. Significant categories of costs include personnel, facilities and equipment costs and third-party and other services. In addition, a significant portion of our research and development expenses is not tracked by project as it benefits multiple projects.
We monitor patient enrollment, the progress of clinical studies and related activities to the extent possible through internal reviews of data reported to us by the vendors and clinical site visits. Our estimates depend on the timeliness and accuracy of the data provided by our vendors regarding the status of each program and total program spending.
For clinical studies, expenses are accrued based upon milestones and the number of patients enrolled over the duration of the study. We monitor patient enrollment, the progress of clinical studies and related activities to the extent possible through internal reviews of data reported to us by the vendors and clinical site visits.
LX9211 has received Fast Track designation from the FDA for development in diabetic peripheral neuropathic pain. • We are conducting preclinical research and development and preparing to conduct clinical development of compounds from a number of additional drug programs originating from our internal drug discovery efforts.
We are conducting a Phase 2b clinical trial of LX9211 in diabetic peripheral neuropathic pain, or DPNP, and have received Fast Track designation from the FDA for development of LX9211 in that indication.
We are presently devoting most of our resources to the research and development of our most advanced drug candidates: • Sotagliflozin, an orally-delivered small molecule drug candidate that we are developing as a treatment for heart failure and type 1 diabetes; and • LX9211, an orally-delivered small molecule drug candidate that we are developing as a treatment for neuropathic pain.
We are presently devoting most of our resources to the commercialization of INPEFA for heart failure, preparations for the potential commercial launch of sotagliflozin for patients with type 1 diabetes and CKD and the continued research and development of sotagliflozin, LX9211, LX9851 and our other drug candidates.
Under the NDA, we are seeking regulatory approval to market sotagliflozin to reduce the risk of cardiovascular death and hospitalization for heart failure in adults with heart failure and in adults with type 2 diabetes mellitus, chronic kidney disease and other cardiovascular risk factors.
We are devoting most of our resources to the commercialization of our approved drug, INPEFA, for heart failure and the research and development of our most advanced drug candidates: • We are commercializing INPEFA, an orally-delivered small molecule drug, in the United States to reduce the risk of cardiovascular death, hospitalization for heart failure, and urgent heart failure visits in adults with heart failure or type 2 diabetes mellitus, chronic kidney disease, or CKD, and other cardiovascular risk factors.
We have derived substantially all of our revenues from strategic collaborations and other research and development collaborations and technology licenses, as well as from commercial sales of our XERMELO product following its commercial launch in February 2017 until our sale of XERMELO and related assets to TerSera Therapeutics, LLC in September 2020.
We have derived substantially all of our revenues from strategic collaborations and other research and development collaborations and technology licenses, as well as from commercial sales of our approved drug products. To date, we have generated a substantial portion of our revenues from a limited number of sources.
Third-party and other services relate principally to our clinical trial and related development activities, such as nonclinical and clinical studies and contract manufacturing. • Personnel – Personnel costs increased 25% in 2022 to $13.5 million, primarily due to higher employee salaries and benefit costs as a result of increasing headcount during 2022 in preparation for commercialization of sotagliflozin.
Years Ended December 31, 2023 and 2022 • Third-party services – Third-party services relate principally to our clinical trial and related development activities, such as preclinical and clinical studies and contract manufacturing. Overall, third-party services increased 16% in 2023 to $34.6 million, primarily related to increased manufacturing and external research and development costs.
Years Ended December 31, 2022 and 2021 • Third-party and other services – Third-party and other services decreased 14% in 2022 to $29.9 million, primarily due to decreases in professional and consulting fees relating to preparations for the submission of our application for regulatory approval to market sotagliflozin in the United States for heart failure.
These costs were partially offset by lower professional and consulting fees in 2023 when compared to costs incurred in 2022 related to preparations for the submission of our application for regulatory approval to market INPEFA for heart failure in the United States. • Personnel – Personnel costs increased 6% in 2023 to $14.3 million from $13.5 million in 2022, due to increased headcount in 2023.
That NDA was supported by positive results from three Phase 3 clinical trials evaluating the effect of sotagliflozin on type 1 diabetes in approximately 800, 800 and 1,400 patients, respectively. The FDA issued a complete response letter regarding our NDA for sotagliflozin in type 1 diabetes.
Following FDA feedback from recent discussions, we are now preparing to resubmit our NDA for patients with type 1 diabetes and CKD. We have reported positive results from three Phase 3 clinical trials of sotagliflozin in type 1 diabetes.
This consisted primarily of the net loss for the year of $101.9 million, partially offset by a net decrease in operating assets net of liabilities of $0.4 million and non-cash charges of $12.7 million primarily related to stock-based compensation expense.
We used cash of $161.9 million in our operations in 2023 largely reflective of the net loss for the year of $177.1 million which included non-cash charges of $12.6 million primarily related to stock-based compensation expense. Investing activities used cash of $49.9 million in 2023, primarily due to net purchases of investments.
At our request, the FDA has issued a public Notice of Opportunity for Hearing on whether there are grounds for denying approval of our NDA and the hearing process is ongoing. • We are developing LX9211, an orally-delivered small molecule drug candidate, as a treatment for neuropathic pain.
We are also developing sotagliflozin as a treatment for hypertrophic cardiomyopathy, or HCM, and are preparing to initiate a Phase 3 clinical trial of sotagliflozin in HCM. • We are developing LX9211, an orally-delivered small molecule drug candidate, as a treatment for neuropathic pain.
We had approximately $138.4 million in cash and cash equivalents and short-term investments as of December 31, 2022. We believe that t he working capital available to us will be sufficient to meet our cash requirements for at least the next 12 months.
For additional information on the private placement offering, please refer to Note 13 of the Notes to Consolidated Financial Statements. As of December 31, 2023, we had $170.0 million in cash, cash equivalents and short-term investments. As of December 31, 2022, we had $138.4 million in cash, cash equivalents and short-term investments.
Removed
We are devoting most of our resources to the research, development and preparation for commercialization of our most advanced drug candidates: • We have a pending NDA for sotagliflozin, an orally-delivered small molecule drug candidate, as a treatment for heart failure.
Added
We are separately pursuing regulatory approval of sotagliflozin as a treatment for type 1 diabetes. The U.S. Food and Drug Administration, or FDA, issued a complete response letter regarding our New Drug Application, or NDA, for sotagliflozin in type 1 diabetes in March 2019, which we appealed.
Removed
The NDA is currently under review by the FDA and has been assigned a PDUFA target action date of May 27, 2023. The NDA is supported by positive results from two Phase 3 clinical trials evaluating the effect of sotagliflozin on long-term outcomes related to cardiovascular death and heart failure in approximately 10,500 and 1,200 patients, respectively.
Added
We expect to continue to incur significant research and development costs in connection with the continuing research and development of our drug candidates and significant selling, general and administrative expenses in connection with our commercialization of INPEFA. As a result, we will need to generate significantly higher revenues to achieve profitability.
Removed
We are now preparing for the anticipated commercial launch of sotagliflozin in the United States following approval. We have also engaged in the development of sotagliflozin in type 1 diabetes, which was the subject of a separate NDA.
Added
Our estimates depend on the timeliness and accuracy of the data provided by our vendors regarding the status of each program and total program spending. We periodically evaluate the estimates to determine if adjustments are necessary or appropriate based on information we receive.
Removed
Actual results could differ from those estimates and assumptions, thus impacting our reported results of operations and financial position.
Added
Consequently, fully-loaded research and development cost summaries by project are not available.
Removed
In addition, a significant portion of our research and development expenses is not tracked by project as it benefits multiple projects. Consequently, fully-loaded research and development cost summaries by project are not available. Impairment of Long-Lived Assets Our long-lived assets include property, plant and equipment, right-of-use assets for leases and goodwill. We regularly review long-lived assets for impairment.
Added
Revenues Revenues for the year ended December 31, 2023 were approximately $1.2 million, primarily from product revenues recognized from sales of INPEFA following its regulatory approval in May 2023. Cost of Sales Cost of sales during the year ended December 31, 2023 consist of third-party manufacturing costs and freight associated with sales of INPEFA.
Removed
The recoverability of long-lived assets, other than goodwill, is measured by comparing the assets carrying amount to the expected undiscounted future cash flows that the asset is expected to generate.
Added
Prior to receiving regulatory approval on May 26, 2023, we had completed or begun the manufacturing of certain INPEFA raw materials. These raw materials were either received at “zero-cost” to us in conjunction with a terminated agreement in 2019 or recorded as research and development expense.
Removed
Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount, and the asset’s residual value, if any.
Added
Based on our expectations for future manufacturing costs, we estimate these amounts totaled approximately $39.0 million. We began capitalizing inventory manufactured subsequent to regulatory approval of INPEFA as the related costs were expected to be recoverable through the commercialization of the product. At December 31, 2023, substantially all of the “zero-cost” INPEFA raw materials remains available to us.
Removed
We use internal cash flow estimates, quoted market prices when available and independent appraisals as appropriate to determine fair value. We derive the required cash flow estimates from our historical experience and our internal business plans and apply an appropriate discount rate.
Added
The “zero-cost” inventory is expected to be consumed over approximately the next three years, which will result in a lower average per unit cost of materials during that period; however, the time period over which this inventory is consumed will depend on a number of factors, including the amount of future INPEFA sales, use of this inventory in clinical development or other research activities, production lead times, and/or the ability to utilize inventory prior to its expiration date.
Removed
In 2020, we recognized an impairment loss of $1.6 million to reduce the carrying value of the assets comprising our campus in The Woodlands, Texas, which were sold in December 2020, to an estimated fair value, less estimated selling costs.
Added
We estimate our cost of goods sold as a percentage of net product revenue will be less than 10% subsequent to the utilization of all of the remaining “zero-cost” inventory.
Removed
There were no significant impairments of long-lived assets in 2022 or 2021. 40 Goodwill is not amortized, but is tested at least annually for impairment at the reporting unit level. We have determined that the reporting unit is the single operating segment disclosed in our current financial statements.
Added
Facilities, equipment, and other costs were $4.9 million and $5.2 million in 2023 and 2022, respectively.
Removed
Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. The first step in the impairment process is to determine the fair value of the reporting unit and then compare it to the carrying value, including goodwill.
Added
The increase in these costs in 2023 was primarily due to travel, training, and software licensing in conjunction with the commercial launch of INPEFA. Interest and Other Expense Interest and Other Expense .
Removed
We determined that the market capitalization approach is the most appropriate method of measuring fair value of the reporting unit. Under this approach, fair value is calculated as the average closing price of our common stock for the 30 days preceding the date that the annual impairment test is performed, multiplied by the number of outstanding shares on that date.
Added
The loan and security agreement was subsequently amended in August 2022, May 2023, June 2023, December 2023 and March 2024. The fourth $25 million tranche is available for draw at our option upon the achievement of specified INPEFA net sales and until April 25, 2025.
Removed
A control premium, which is representative of premiums paid in the marketplace to acquire a controlling interest in a company, is then added to the market capitalization to determine the fair value of the reporting unit. If the fair value exceeds the carrying value, no further action is required and no impairment loss is recognized.
Added
The fifth $25 million tranche is available for draw at our option, subject to Oxford’s consent, at any time prior to the expiration of the 36-month interest-only payment period.
Removed
Additional impairment assessments may be performed on an interim basis if we encounter events or changes in circumstances that would indicate that, more likely than not, the carrying value of goodwill has been impaired. There was no impairment of goodwill in 2022, 2021 and 2020.
Added
The loan and security agreement includes a financial covenant relating to INPEFA net sales and a separate financial covenant which requires us to maintain a minimum cash and investments balance of $10 million until the achievement of specified INPEFA net sales. Upon funding of the fourth tranche, the minimum cash and investments balance will increase to $25 million.
Removed
Recent Accounting Pronouncements See Note 3, Recent Accounting Pronouncements, of the Notes to Consolidated Financial Statements, for a discussion of the impact of new accounting standards on our consolidated financial statements.
Added
In December 2023, we entered into an Open Market Sale Agreement SM with Jefferies LLC pursuant to which we may offer and sell shares of our common stock having an aggregate sales price of up to $75 million from time to time through Jefferies as sales agent.

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